trailstop-300x156 Swing Trading Tactics: How to Use Market Levels to Trail Your Stops

Swing trades are typically short-term scenarios. But sometimes, when a trade is working well, you might want to “let your winners run,” as the saying goes. In contrast to using a dollar-based stop, a percentage-based stop, or a platform-based trailing stop, it might help to trail your stops manually. And an effective way to do this is to follow the natural swings in the market.


In our hypothetical example, we illustrate a “long” entry into XLK, SPDR Tech ETF, at [1]. Placing a stop loss a few points below the nearest swing low [2] can help you manage your risk. Perhaps your original price target was at [A]. Trailing your stop by moving it to a few points below each consecutive swing low (see arrows and red lines) can help you lock in your profits should the trend reverse. But as you can see, with XLK continuing to trend upwards, using this trailing method might have kept you in the trade, even to the present time.


Bear in mind that trends aren’t always this clean. But again, when a trend does have these attributes, why limit yourself by closing it out too early? By using this trailing method, when a market really does “take off,” you might be able to let your winners run while effectively managing your downside risks. 


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Trading futures, options on futures, and forex involves substantial risk of loss and is not suitable for all investors. The use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.