Mystery of the missing trailing stop.

In response to my trades given in the previous post, I have comments on the trailing stop loss which was ‘missing’ in my trading plan.

mbansalicy says “one thing i missing in your trading plan is trailing stop loss”. Nikhil says “Also, one should keep trailing stop loss”.

So, what happened to the trailing?

My Notes: A bullish trend day will usually open in the lower part of the day’s range and close in the top part. Within the range, there may be some choppiness which is difficult to predict. A trailing stop may stop me out and then the trend could resume. My risk is well defined – it is the low of the day. I have to accept the intraday choppiness if I want to catch the trend day. This is the reason, there is no trailing stop in ORB trades (essentially the ORB leads to a trend day).

I have done ample system testing to justify this view.

Nifty Live Oct 12-11

Here is a description of my Nifty trades for today. Pre-Market, I expected the Nifty to gap up and stay up. This means I was looking for a trend day. Well, the Nifty did open higher with a gap. It then started a move up. I went long at 5034 and 5022 (on a dip) (Values are for October futures). My stop was the day’s low at 5006. If the market is to go up, then the low should not be broken. Futures rallied nicely to 5060  then IIP numbers saw the Nifty dip to 5022. My trade continued. We saw another rally to 5066 then a sharp and sudden decline saw the Nifty fall below 5006. I was stopped out. I was convinced that we were looking at a trend day, but the trading must be done with discipline, so I was stopped out. There was a reentry plan. I would go long again at 5066 which was the day’s high (till then). It would be a breakout trade, but I have to take it since the intra day charts were upbeat.

The Nifty started a rally, I went long again at 5066, then exited the trade at 5115 – almost at the close of the day.
Lessons learned:  (1). Follow your plan.   (2). Trade without tension. – If I were in tension, I would have made any number of mistakes. The reason I am not in tension is due to control of my trading volume. I still make mistakes – many of them – but at least I am not in tension.
A bullish head and shoulder in the 60 minute chart, suggests a breakout giving a target of 5350 approx. Well, the markets will and do surprise us.