LBM1 -
Good question, but also a tough one to answer as I believe it depends on your trading style and approach. I also don't think one size fits all.
For example, for stocks that I am day or swing trading, I do not set system generated stops. (ie - Auto sell on this price hit/etc). I do set expected sell points (both stop and profit exit) before I enter a trade, but am willing to let both of these run depending on the chart and current action.
These sell points are usually based on a chart S/R area, Fib, etc vs a percentage target.
On my core or longer term holdings, I will use a support trendline of the major trend as my "line in the sand" stop.
These I DO set for system generated auto sells which allow me to take a vacation, leave the market, etc.
However, I tend to set these mostly based off a weekly chart and adjust (if needed) as part of my Sunday evening pre-trading week prep.
Where I will use a percentage based stop is for stocks that I have already taken 1/3, 2/3, 1/2, etc off the table on rises or gaps. At this point, I am playing with "house money" and will usually target an 8-9% trailing stop.
This rule also needs to be "tweaked" for individual stocks based on their ability for wide swings through the day.
I know the above is "clear as mud", but hope it helps give you a perspective on what someone else does.
Bottom line - it is all personal choice as to what you feel comfortable with and what lets you sleep at night. |
