I had an e-mail from one of my bloggers, Terry, last week about my trailing stop loss in light of the fact that I had a few losing trades on the 5 minute chart that were winners on the 10 minute chart. The 4 bar trailing stop gives a 40 minute delay on the 10 minute chart giving the trade more room to move than the 20 minute delay in the 5 minute chart. He suggested going for a compromise by changing to a 5 or 6 bar trailing stop on the 5 minute chart which would give the trade more room to move without risking as much as the 10 minute chart would on a straighforward losing trade.
Of course, the trade off with extending the trailing stop is that if the market chooses to go completely the other way then you would lose more pips the longer the stop is delayed. There are an inifinite amount of combinations that can be tried, but seeing as I did have a few trades last week that could have been profitable with a little more room for it to move I decided to try upping my trailing stop to 5 bars in the 5 minute chart for this week to see how it goes. This will no doubt mean less profit on the winning trades but it could also mean more winners instead of losers so lets see how it does. We know the 4 bar works pretty well so if this week is a wash out, I’ll go back to that next week.
This morning I drew about even on the GBP/USD (well a 3 pip loss) but the 4 bar would have made a small profit of a few pips. On the EUR/USD, however, I managed to get 15 pips whereas the 4 bar trail would have drawn even. So today it has worked in my favour, but lets see how we get on the rest of the week.