Introduction

At Global Accountancy Institute, Inc., and Global Financial Engineering, Inc., we believe that a trailing stop is an adequate means to manage a trade professionally. The prerequisite for this is that the loss limitation and profit protection stop does not become a “trade termination stop.” This article, authored by Dr. Glen Brown, will delve into the use of trailing stops within the Global Algorithmic Trading Software (GATS), providing insights on how to effectively manage trades using this powerful tool.

Understanding Trailing Stops

A trailing stop is a dynamic stop-loss order that adjusts itself as the price of an asset moves in a favorable direction. It helps lock in profits while still allowing the trade to continue gaining value. There are several variants of trailing stops, each suited to different trading styles and objectives.

Benefits of Trailing Stops

1. Profit Protection: Trailing stops help secure profits as the price moves in your favor.
2. Risk Management: They limit potential losses by automatically closing the position if the price moves against you.
3. Emotional Discipline: Automated trailing stops remove emotional decision-making from the trading process.
4. Flexibility: Trailing stops adjust dynamically, allowing traders to capture more significant trends.

Trailing Stop Strategy for Each GATS Trading Strategy

In the Global Algorithmic Trading Software (GATS), we have 9 default trading strategies, each employing a unique approach to trailing stops by using different multipliers of the Average True Range (ATR) based on specific timeframes.

1. Global Momentum Scalper (M1 Timeframe)

• Trailing Stop: 13 times the ATR of M30 with a period of 25.
• Profit Target: 10 times the initial risk.

2. Global Quick Trend Trader (M5 Timeframe)

• Trailing Stop: 13 times the ATR of M30 with a period of 25.
• Profit Target: 10 times the initial risk.

3. Global Rapid Trend Catcher (M15 Timeframe)

• Trailing Stop: 13 times the ATR of M30 with a period of 25.
• Profit Target: 10 times the initial risk.

4. Global Intraday Swing Trader (M30 Timeframe)

• Trailing Stop: 13 times the ATR of M30 with a period of 25.
• Profit Target: 10 times the initial risk.

5. Global Hourly Trend Follower (M60 Timeframe)

• Trailing Stop: 10 times the ATR of M60 with a period of 25.
• Profit Target: 10 times the initial risk.

6. Global 4-Hour Swing Trader (M240 Timeframe)

• Trailing Stop: 8 times the ATR of M240 with a period of 25.
• Profit Target: 10 times the initial risk.

7. Global Daily Trend Rider (M1440 Timeframe)

• Trailing Stop: 6 times the ATR of M1440 with a period of 25.
• Profit Target: 10 times the initial risk.

8. Global Weekly Position Trend Trader (M10080 Timeframe)

• Trailing Stop: 5 times the ATR of M10080 with a period of 25.
• Profit Target: 10 times the initial risk.

9. Global Monthly Position Trend Trader (M43200 Timeframe)

• Trailing Stop: 4 times the ATR of M43200 with a period of 25.
• Profit Target: 10 times the initial risk.

Implementation of Trailing Stops

1. Determine the ATR: Calculate the ATR for the specified timeframe (e.g., M30 for strategies 1-4) using a period of 25.
2. Apply the Multiplier: Multiply the ATR value by the specified factor (e.g., 13 for strategies 1-4).
3. Set the Trailing Stop: Establish the trailing stop distance from the current price based on the calculated ATR value.
4. Adjust Dynamically: As the trade progresses and the price moves in favor, adjust the trailing stop level to lock in profits while accommodating market volatility.

Practical Example: Global Momentum Scalper

• Timeframe: M1
• ATR Calculation: Determine the ATR for M30 with a period of 25.
• Trailing Stop: 13 times the ATR value of M30.
• Profit Target: 10 times the initial risk.

If the ATR for M30 is calculated to be 0.5:

• Trailing Stop Distance: 13 * 0.5 = 6.5 pips
• Initial Risk: 1 pip
• Profit Target: 10 * 1 = 10 pips

As the trade progresses, the trailing stop will adjust dynamically to maintain a 6.5-pip distance from the highest price reached, ensuring profit protection while allowing for further gains.

Conclusion

The use of trailing stops within GATS reflects a sophisticated approach to trade management, balancing risk limitation with profit maximization. Each strategy’s unique multiplier of the ATR ensures that the trailing stop is tailored to the specific market conditions and timeframes, providing a robust framework for professional trading.

By adhering to these principles, traders can effectively manage their trades without turning trailing stops into “trade termination stops,” thereby enhancing overall trading performance and achieving the desired reward to risk ratio.

About the Author: Dr. Glen Brown

Dr. Glen Brown stands at the forefront of the financial and accounting sectors, distinguished by a career spanning over a quarter-century marked by visionary leadership and groundbreaking achievements. As the esteemed President & CEO of both Global Accountancy Institute, Inc., and Global Financial Engineering, Inc., he steers these institutions with a steadfast commitment to integrating the realms of accountancy, finance, investments, trading, and technology. This integrative approach has solidified their status as pioneering entities in global multi-asset class professional proprietary trading and education.

Holding a Doctor of Philosophy (Ph.D.) in Investments and Finance, Dr. Brown possesses profound expertise that covers an impressive spectrum of financial disciplines. His knowledge extends from financial accounting and management accounting to intricate areas of finance, investments, strategic management, and risk management. His role transcends traditional leadership; as the Chief Financial Engineer, Head of Trading & Investments, Chief Data Scientist, and Senior Lecturer, Dr. Brown embodies the spirit of hands-on innovation and scholarly excellence.

Dr. Brown’s guiding philosophy, “We must consume ourselves in order to transform ourselves for our rebirth,” encapsulates his holistic approach to professional and personal development. It underscores a belief in the transformative power of self-reflection, creative imagination, and the relentless pursuit of spiritual and intellectual growth. This ethos is the bedrock of his dedication to not just navigating but shaping the future of finance and investments with innovative solutions.

Beyond his executive and academic roles, Dr. Brown is a fervent advocate for continuous learning and innovation. His leadership has catalyzed a culture of forward-thinking at Global Accountancy Institute, Inc., and Global Financial Engineering, Inc., propelling them into the vanguard of financial education and proprietary trading. Under his guidance, these institutions not only adapt to the evolving financial landscape but actively contribute to its development, offering state-of-the-art solutions to the industry’s most complex challenges.

Dr. Brown’s commitment to excellence is matched by his dedication to nurturing the next generation of financial professionals. Through his visionary outlook and unique philosophical approach, he inspires a cadre of students and professionals alike to transcend conventional boundaries, fostering an environment where innovation, leadership, and success flourish.

In essence, Dr. Glen Brown is not just a leader but a pioneer, educator, and innovator whose life’s work continues to impact the global finance and accounting industries profoundly. His legacy is defined by the relentless pursuit of excellence, the transformation of challenges into opportunities, and the unwavering belief in the potential for rebirth and regeneration in the professional realm.

General Disclaimer

The information provided in this article is for educational and informational purposes only. It should not be considered financial or investment advice. Trading financial assets involves significant risk and may not be suitable for all investors. Past performance is not indicative of future results. Always conduct your own research and consult with a licensed financial advisor before making any trading decisions.

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