On combining trailing stops and take profits for stop loss , maximising profits

On combining trailing stops and take profit, and swing highs /lows for stop loss in trending trades

I know that if I use take profit targets I could grab a profit while it’s high (e.g. 2R or 3 R) , before I lose it to a lower value from a trailing stop loss, but some say to “let the profits run”… What is the best thing to do , when managing stop loss (trailing ) and take profits for trending trades (trendline bounces and fibonacci retracement trades)? Should I maybe wait till I get to at least 1:1 or 1:2, and then trail a stop loss but take profits if they get to 1:3 or 1:2. i’m just saying this as an example. don’t know what approach is the best approach and leads to maximizing profits. Or maybe just set only a trailing stop loss on swing highs/lows that follow. Seeking advice from people.
Thank you.

May be you should try to use those for some period as a test and which one will give you the best results.

I think this mostly depends on market environment and how strong you think the trends are likely to last. In a ranging low-liquidity situation, I usually just lock in profits at 1:1 by closing half my position and letting the rest run with a trailing stop. In strongly trending situations, you can even add on breaks of near-term support/resistance to increase your R:R while trailing your stop to protect your profits.

I agree with Rambo35 though, just try various methods and record your results to see what works out. Also, it helps to review those outcomes to see if you could’ve played it better or made different adjustments to press your advantage.

You should trade what’s there and not what you want to see. On different trades you will have different R:R’s, I think it is a big mistake to say you want a R:R of x:x on every trade. As was suggested above, try different things the way you think it is best for you and compare the outcomes.

One doesn’t: it requires very careful, methodical, statistically significant testing. There [U]isn’t[/U] an [I]overall[/I] “best approach”.

My own opinion is that in general, for most systems, most of the time, trailing stops lose money. I have several different reasons for believing this …

(i) When I tested my own five little systems, only one of them gained from a trailing stop: the others all lost;

(ii) In other forums, when I’ve occasionally made this comment, I’ve always had some “Good heavens - you’re right!” comments from people who have methodically backtested it for the first time and realised that they were more profitable without the trailing stop;

(iii) All the authors whose textbooks I really respect and whose opinions have proven right and beneficial to me in other areas seem fairly opposed to trailing stops.

They always look and sound attractive and appealing, but it’s very easy to lose count of the times a trade starts off doing well and then retraces a bit (just enough to take out the trailing stop, which has of course moved during the initial phase of the trade), before continuing on its merry way in the “right direction”. So the times that trailing stops cost money tend to be “opportunity cost” money, i.e. you make less than you might have done, i.e. they’re profitable trades anyway (often) which is why one doesn’t always “notice” as much as one would if one were looking at actual losses.

Yes - I believe that trailing a SL manually just above/below the most recently formed swings high/low is, overall, [U]very[/U] significantly likely to be a better approach.

For myself, I’m not willing to use automated trailing stops in the absence of [B]really[/B] clear-cut and statistically valid proof that they’re better than other methods.

I believe that trailing a SL manually just above/below the most recently formed swings high/low is, overall, [U]very[/U] significantly likely to be a better approach.

Thank you, lexys. I’ll take seriously your comment about manual SLs instead of TSs. If you can provide me with some technical understanding as to why trailing stops don’t work, I would truly appreciate it.


It’s something you need to test, to discover whether they make the profit bigger or smaller. (I have once seen [U]one[/U] system with which they slightly helped, when I’ve tested.)

I think the mechanical/technical reason for their commonly costing money is to do with retracements. Prices generally don’t move completely smoothly, and a trend will always contain some price-movement in the opposite direction to its overall direction - this is where trailing stops can catch you out: the trailing stop moves in the direction of the trade, and that [I]reduces[/I] (compared with not using one) the retracement-distance your trade can accommodate without getting stopped out. This can happen even when you’re already in “locked-in profit territory” but can still sometimes cost you most of the move you’ve correctly envisaged.

As mentioned above, in my experience the times that trailing-stops cost you the most profit tend to arise on trades which were (perhaps slightly) profitable anyway, and I [I]suspect[/I] that this reality is probably quite a big component in the fact that such “opportunity-cost losses” tend not be noticed without systematic, methodical, automated testing of some kind. In very simplified terms, when you “test by hand/eye, on a forward-going basis”, there are specific reasons why the occasional advantages of trailing stops are far more easily noticed, overall, than their more frequent disadvantages. (This, at any rate, seems to be the view of the authors of textbook discussions on this subject that I’ve seen, and my own results certainly bear it out.)