Self adjusting trailing stop based on market movements
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At the moment I have something on test on various long strategies that I wrote folloing on from opening this thread. It moves the stop loss closer to the median price as the price falls and moves it up with the median price as it rises. I call it CITS – Closing In Trailing Stop! If the market is falling then it moves up at twice the rate that the median price is falling but if the market is rising then it moves up at the same rate so it does steadily reduce the gap to actual market price with every down candle. It appears to help get out with a smaller loss than a standard trailing stop as it cuts the stop loss distance rapidly in a falling market. In a rising market it trails the market up nicely slowly closing the distance on any market dips. The critical variable is the starting stop loss gap. This varies from market to market and time frame to time frame and it can sometimes be a very big stop loss at the start of a trade – but it is obviously never going to be hit at that maximum loss unless the market fell that complete distance on the first opening candle – which it never does if the gap is wide enough. I did try a similar theory on the take profit but it proved more profitable to just have a trailing stop loss and no take profit or fixed stop loss and fixed take profit. Just open a trade and let the trailing stop move with the market and eventually close the trade out for either a hopefully small loss or a big win after rising up with the market. If the market enters a sideways patch then the CITS will come up to meet price and close the trade. Back testing has proven it to work quite well but I want it to be proven in forward demo testing before putting it on real money.
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