Are Trailing Stop Loss Orders Bad for Intraday Trading? And, Should You Trade in the First 1/2 Hour? -- with David Moadel
welcome to looking at the markets with David Modell this one is dedicated to
all you intraday traders out there you day traders but if you're not a day
trader that's cool you can watch this and learn something as well I found an
interesting and controversial article this is from market geeks.com
and I will put a link in the description below this video so you can click on and
read the original article if you want to and they say a couple of controversial
things you might or might not agree with it so let's see first the first thing
they say and this is only for day trading or intraday trading is about
trailing stop loss orders and I made a video if you don't know what trailing
stops are I made a video explaining what that is and I'll put that in the
description below this video as well I'll put a link for that so you can
click on that and learn all about trailing stops alright so what they did
or what they said they did is back tested thousands of stocks and hundreds
of commodity futures and their test results apparently showed that trailing
stops limit profits this is only for day trading limit profits by approximately
30% Wow and furthermore reduce the percentage of profitable trades from 60
percent down to 40 percent Wow so their conclusion is don't move your
initial stop-loss when day trading don't use a trailing stop that moves just set
a stop loss and just leave it there don't trail it that's what they're
saying I'm not saying it they're saying it so let's see the article trailing
stops lock in profits to minimize risk while trailing stops play a very
important part in short-term in swing trading they don't recommend that
traders use trailing stops for intraday trading after back testing thousands of
stocks and dozens of futures and currency contracts they found that using
trailing stops for intraday trading actually lowers your profit potential by
about 30% what the test results demonstrated was that using trailing
stops when entering and exiting positions during the same day actually
limited profit potential and prevented positions from realizing their full
range for the day when changing the parameters to leave the original
stop-loss in place the percentage of winning traits increased from 40 to 60
percent and profit potential increased as previously stated as well this
clearly communicates that limiting risk by using trailing stops to lock in your
profits actually decreases profit and increases loss over time keep in mind
that this test was performed during intraday trading it did not did not
include holding positions overnight interesting I can neither confirm nor
deny whether this is true but this is what they say and it's really
interesting because when I made a video about trailing stop loss orders I was
pretty positive about them you know I have not done extensive back testing
like this individual says they did but you know I found they're pretty good but
that's just my personal experience you have to make your own decisions and hey
maybe they're right maybe for day traders or intraday traders maybe it's
not so great to use trailing stops maybe it's better just to you know put a limit
order a stop-loss order and just leave it there and just let you get stopped
let yourself get stopped out at that price or not during the day so that's
interesting and here's the other controversial thing do not make trading
decisions during the first half hour the trading day again only for day traders
another important mistake many beginners make when applying intraday technical
analysis is making decisions during the first half hour the trading day I want
to make something clear from the start executing orders during the first half
hour and making trading decisions are two separate things so they clarify that
particular point if you have an existing signal from the previous night or a
stop-loss order in place and these are trades triggered and executed during the
first half hour of the day you're just following your trading plan and that's
what you should be doing so he's saying that's a different situation for example
if you're a swing trader and you had a position overnight and you get stopped
out or make a trading decision the next you know the half hour first half hour
the next day that's not what he's talking about
what I'm referring to is making new trading decisions changing your trading
plan or order placement based on what occurs in the first half hour of the day
this is a very common beginner mistake and something you should avoid doing the
first half hour of the day is mostly trading noise and emotional volatility
interesting ok after the first half hour the market sets the tone for the rest of
the day and allows you to make less emotional trading decisions hmm okay
I've heard that before don't trade during the first half hour
the day some people have said some people also also include the last half
hour of the day which is also tends to be more volatile although it includes
more volume as well but what do you think I'm curious feel free to leave a
comment in the comment section below this video what do you think about
market geeks.com their ideas about trailing stop loss
orders and about trading during the first half hour the trading day for day
traders intraday traders do you agree do you disagree I encourage you to check
out their article there and their website ok I'm not affiliated with them
right now so you know I'm I have no I it doesn't matter to me whether you want
to visit them or not but if you'd like to cool and check out their article and
if you want more information about trailing stops feel free to check out my
video on that alright so I hope this got you thinking I want to create a
community here where we can communicate with each other through the comments
section so let me know what you think also give this a thumbs up if you like
you know if you like that I'm bringing this information to you and expressing
myself and helping you to make decisions on your own about your trading alright
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you