5 Trailing Stop Loss Techniques (Risk Management for Traders)


hey hey what’s up my friend so in this video I’ll share with you five techniques right that you can use to trail your stop-loss right so you can write massive trends in the market that goes on and on and on and on and on so keep watching okay so the first technique that I want to share with you is moving average right by now I think you should be familiar that moving average is something that you can use to trail your stop-loss alright so for example let’s say you went long on the break of this highs over here market break up of this highs over here and you can trail your stop-loss using this moving average this is the 20-period moving average so you only exit that rate when the price breaks and closed below it okay so in this case you would exit your trip over here when the price breaks and close below the 20-period moving average the benefit of using moving average is it’s versatile right if you want to capture a short-term trend you can use a 20-period moving average if you wanna capture a longer-term trend you can use something like the 200 period moving average so you can see that you can adjust the parameters to suit your own trading needs okay so the downside of moving average that I’ll be honest with you is that sometimes right you’re not able to trill your stop-loss using the moving average to say for example the market here retraced slower and then it kept this bullish close over here and you want to go long at this point in time you kind of realize that the moving average is actually above the price right you can trail your stop-loss in this case because the moving average is above the price that you want to go along okay so this is one of the downside of moving average is that sometimes if the Poobah is too deep right and the moving average that you use is too short term like the 20 M II it’s not possible to be trilling with the moving average okay in this case you might have to use a longer term moving average like a 50 ma or 100 MA alright so this is the first technique that I want to share with you using moving average to trill your stop-loss the second technique is a market structure right so for those of you who are price action traders you can use the structure of the markets to trail your stop-loss here’s an example so you can see over here let’s say for example again you long the breakout over here market hits higher retrace right this is the swing low which can reference to set your stop loss alright so your stop-loss go below the swing low market bricks a new high makes a new swing load this swing low you can reference your stop-loss market makes a new high retraces makes a new swing low you can reference it as your stop-loss market makes a new swing high then he retraced us right and finally over here it breaks and close below dear swing low over here where you exit the tree so the benefit right of using market structure to curl your stop-loss instead you are pretty much reading the price action of the markets right and exiting your trades based on the price section so this means right that you can actually no better time your exits right while reading the price section of the monkeys because indicators like moving average right they tend to let whereas price section right it’s a more it uh it doesn’t lack as much compared to moving average or other indicator so price section is something that you can consider using right to trail your stop-loss however the downside to price action is sometimes right the market may form a very deep pullback of right and then finally if we trace at this point in time right you realize that hey you know you may give back a lot of open profits or sometimes it may even retrace so deep right where you end up giving back all of your open profits right because if you were to wait for price action right or rather you were to use market structure you wait for it to make a new swing low and sometimes the market can keep going down low and low and lower before finally makes a new swing low and by the time right your profits are evaporated or you may even end up with you know losing on the trade right so this is the downside off of market structure okay and the technique on a share with you is percentage change this is very straight forward right very useful for stock traders all right so this chat Alibaba you can see that it made a high of a hundred and ten dollars so what you can do is that you can just use a percentage change to trailer stop-loss so hundred and ten right so if the price drops ten percent you’ll exit the trade so very simply put right ten percent of hundred and ten is pretty much eleven dollars so if the price goes to 109 in this case over here it drops to sorry I beg your pardon right horrible method right the price drops right to below ninety nine right goes under in ten minus 11 is ninety nine right you will exit the trade so in this case over here the price break and close below the 99 level and you’ll exit the trade so this is one way you can use a percentage changes or two trillion stop-loss the downside to this approach is that if you’re trading FX markets right where you get price point like one point zero one five two right it’s pretty damn difficult to calculate ten percent based on this four decimal places right so obviously this is more up for more suitable for stock markets right maybe even crypto currencies like Bitcoin where the numbers are larger and easier to to make and reference from it okay the fourth technique I want to share with you is Average True Range right a very powerful way to trail your stop-loss as well how it works is that okay so this ignore this indicator for a while alright so by right right you know what the ATR indicator is it’s a measurement of volatility in the market so if you pull out your ATR indicator it will give you a value so let’s say for example the ATR indicator currently shows you let’s say a hundred pips right this is for euro dollar okay so hundred pips right let’s say for example you along one euro dollar and you’re trailing with this five eighty our example so what you’ll do is that the mock the indicator right you will take the highest price over here right and – off 580 are so current eighty eight hundred people so five ATR is five hundred pips so this is where you pretty much right get this green line over here it’s pretty much five ATR away from this heist so this indicator here is called the chandelier stop it’s a variation of the average True Range indicator right by this more morva using it as a trailing stop loss approach right you can use this a chandelier stop which takes into account the average true range of the markets to set your trailing stop loss alright so again this is like moving average it is versatile you can change this to three ATR 6 ATR 10 in here depending on the type of trends then you want to capture my this is the core idea the core concept behind how this indicator moves right is pretty much based on the average True Range approach right the downside to this is similar to the moving average is that let’s say for example right you want to say shot how about you want to short let’s say over here right the market has been steadily declining lower and for whatever reason you decide to go shot right at this point in time ready this indicator is actually at the lower end right which is meant for traders who are long to trail their stop loss right you can see that the line is not above it right I believe we can make some adjustment and change this line to the top right where it’s being calculated from the lows instead right right yes this line over here is completed now from the highest that’s why this line is being shown right you may have to tweak it and tell this indicator to now drill it from this low instead so the line will be above it and you casually trill your stop-loss on based on this short treat then you can you hypothetically wanted to tree okay so this is a another downside of the average true range or dish and the little stop indicator and lastly right you can use the previous candle high-low to trill your stop-loss right so let me share with you an example so if you recall right Bitcoin it has been moving pretty strongly over the last ANSI 2017 right you can see that the market when parabolic over here the range of the candles got larger and larger right so where you could have trailer stop-loss is that if the price right breaks and closed below the previous stay low you’ll exit the trade which is as you can see is on this candle over here let’s you know zoom in a little bit right you can see this candle break and close below this previous candle look right so this is where you exit the trade so the the beauty right of using this approach is that when the market goes parabolic okay and you trailer stop loss using a previous candle high or low approach right you can actually save or rather protect a huge amount of open profits in this case you pretty much exit near this out say 16,000 to 300 level right and in Bitcoin as you know at this point in time of this video is currently trading around the 7000 level alright so you can see that you pretty much exit near the highs right if you were to follow this a previous candle high-low approach right high / low approach this is very useful if the market called parabolic right how do you know if the price is parabolic just look at the range of the candles is getting larger and larger and in terms of the direction right it’s like 1 o’clock if you look at the clock right the one o’clock Direction is like steeper than the one o’clock direction with the range of the candles getting larger and larger this is a huge clue to you that the market has gone parabolic and you might want to consider trilling and stop-loss using a previous candle high / low approach in this case since you’re long gone you drill it based on a previous candle low approach so the downside to this approach right of course are is that you might get stopped out of your trade way too early especially if the market is in a healthy trend where there is no obvious app and flow in the market like the market goes up higher pulls back goes up higher pulls back goes up higher in this case right if you were to trail your stop-loss right based on the previous candle low you realize that you are pretty much getting stopped up too early right so you want to read the price action context and then you know to decide whether this approach would suit you best okay so it’s a quick recap right the first technique I share with you is to use moving average to trailer stop-loss right then you or you can use the market structure right referencing from the swing high and swing low to trill your stop-loss you can use percentage change as well right if the price drops X percent you exit the trade you can use the Average True Range right / and the little stop right to trailer stop-loss which is actually based on volatility of the market and last but not least you can drill it based on the previous candle high or low which is very useful right when the market has gone parabolic okay so I’ve come to the end of this video if you want to learn more right go down to my website trading with Rainer come over here at the top right and and if you wanna learn more right for example this video we focus a lot on exits and trailing stop loss you’re gonna learn about entries right go ahead to my website trading with Rainer comm download this guide over here the ultimate guide to price action trading where you learn how to better time your entries and read the price section of the market so I just click this blue button and I’ll send it to your email address for free okay so with that said I have come to the end of this video if any feedback comment let me know in the comment section below if you’ve enjoyed this video hit the like button subscribe to my youtube channel I would really appreciate it and I’ll talk to you soon you

36 thoughts on “5 Trailing Stop Loss Techniques (Risk Management for Traders)”

  1. Ever wonder why almost all brokers DON'T offer an adjustable automatic trailing stop loss setting? Almost as if they want their retail customers to lose their money?

  2. Good tips! As stop gain, i use a combination of Chandelier stop with Donchian channel. I always use the one which is closer to the price as a stop gain. They complement each other, it's very effective for me.

  3. Thank you, Rayner, for sharing very good knowledge on SL. I have a doubt that some time in intraday price comes below the moving average and again jumps to near the high, can you please guide how can I avoid this kind of situation and it not eat my SL, if I am using moving average as my SL. And lots of thank you..for the price action technique.

  4. Thanks. can one combine two or more of these strategies and what tool can be used to effectively track momentum?

  5. Hello Rayner, when trailing your stop loss do you need to be around your computer to adjust or the system will automatic move? Can you please explains thanks.

  6. Great stuff, Also I wanted to know how exactly the trailing stop loss works, as from which point it trails and whats the distance it keeps from the market price as the price is moving up?

  7. Really supportive videos especially for beginners, what is a little annoying is the phrase "Hehe what's up my friends" other than that supper!

  8. Hi Rayner- When it comes to the chandelier stop loss indicator, which ATR period would you use? Lets say I want to capture the intermediate term trend on a daily chart? Should I use 4 , 5 or 6 period length?
    Keep up the videos. You rock!!

  9. Thank you so much sir. I appreciate you for keeping things VERY simple. Looking forward to the course soon.

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