In this video, you're going to be learning a few simple hacks to set appropriate trailing stop losses when trading within the stock market. A trailing stop loss basically adjusts your stop-loss as the price changes. basically stop losses that trail behind you like a horse trails a carriage. And I do want to start this by saying that I've never been a huge fan of actual mechanical static stop losses.

I Just think this doesn't accurately take into consideration me minute by minute movements within the market. Simply put: I Personally find that if you know what you are doing and aren't driven by emotion most of the time, these stop losses are more of a barrier to success than they are a tool for risk management. And of course, there's the issue with market makers executing you out at certain pot their levels of stop losses since all stop losses are usually set to be in public. but I made a whole video on this.

so I don't want to go to you off topic I put the link in the description if you're curious though. but I don't live under a rock and the reality is that a lot of new and novice traders are probably going to be better off having some form of a stop loss since trading is really just a game between probability and your own emotions, hedging against emotions should help you. So while I still am NOT a fan of these static stop loss I am a fan of the trailing stop loss. If it's done correctly, it can be a very effective strategy for lowering your risk and maximizing your potential over the long run.

So in this video, we're going to be going through some of my hacks to appropriately set up stop losses when trading. and the only thing I ask of you in return for this wonderful Trailing Stop loss knowledge is that you hit that ravishing like button. And of course of course also subscribe for more short, sweet and simplified videos on how to trade the stock market. Ok, so to start I do want to say that I'm not ragging on folks who are profitably using me.

Static Stop Losses: There are tons of people that Stop-loss does fit well into their trading style. It just isn't my style. Please find a style that works best for you. I Can only speak from my own experiences, so going back to the example in the intro, you know that the best entry points aren't.

Upon confirmation, we enter upon a confirmation of price strength and that allows us to ride the price ranked up while measuring our strength over our blue SMA 1. Now the pro of this is that you know when the position is turning against you. When you see that break below the SMA line or more aggressively holding below, you know that you've reached a validation point which you are validated in exiting. So how does a Trailing Stop Loss play into this? Well, the most perhaps mechanical and straightforward way to use a Trailing Stop Loss is to simply set it to break below our blue short term SMA line.

If you are validating and exiting upon a break below RSM a line and thus a break of price strikes, then it makes sense to set a trailing stop loss to execute you out at that point. and this is sort of what I'd call trailing stop loss in. For beginners, it's a decent hack for those of you who don't want to stare at the chart and wait for a break of price strength all day. But this is sort of the training wheels of the market where you're not yet confident enough in your abilities or emotions to allow yourself to manually execute out of a position upon validation.

And if this is something that you are having trouble with, then by all means, do go ahead and use this strategy for your trimming stop loss and tell you no longer have the problem. but as you get more advanced, the reality is going to switch. As you start getting more experience in trading, you're going to start looking at validation points differently. The validation point is a point where you ask yourself, does it make sense to exit the position here based on all of the other factors.

It's not just the point where you blindly exit, although it can be if you're trying to trade really conservatively. But as you get more experienced, you're going to use a validation point as a point where you're asking yourself if it makes sense or are you actually validated in exiting. Here you have the validation point, right? So that's one deprecating factor, but you're going to check for everything. And I do have a trading checklist, which I'll link to below.

But essentially this is a point to ask yourself based on these factors such as whether or not it is a good deal on the Hara side. If you're trading below or above fair value, etc. you're going to ask yourself if it makes sense to sell out of the position and if it makes sense to sell out of your position and validation, that's when you do so. And by the way, that's the same thing with confirmation points.

We don't just buy in upon confirmation, we buy in. When it is confirming, it is confirming what we already thought based on the other factors at hand. and when we are selling out, we sell out when we are validated and selling based on all the other factors at hand. So with this in mind, you know that setting a mechanical stop loss at validation is one strategy.

but this is for folks who are beginners. in our at a stage where they can't bust themselves yet they can't trust themselves yet to follow through with their plan. Everybody needs to have an entry and an exit point plan. This is for folks who have an entry point plan but they don't know that they can yet trust themselves because of emotions when it comes to exiting.

So they're going to be studying a exit point. a mechanical exit point at validation if you are at this stage, absolutely set a trailing stop loss to sell you out at a break of the SMA line. If you want to be a little less conservative, you can set it so that it sells you out when you actually close below the SMA line just so that you don't get taken out by the highs and lows for that period. aka the wicks.

you don't want to be executed out of too many trades. But anyways, once you've progressed past this stage, your trailing stop loss should function to protect you from only the worst-case scenarios with your own due diligence protecting you from minor cutbacks. If I am executing a position upon price strikes and directional strength above both our SMA lines, the worst case scenario for me isn't a validation point because I could simply just sell out manually if and only if I find it appropriate. But the worst-case scenario is a massive and quick drop below the directional SMA line.

If I am looking for a price to continue up trending, then a break of Direction downward below our direction less than a line is a disaster. It's frankly, a disaster. a tsunami of unfortune ality, so we want to be able to shield ourselves from that while also keeping our ability for due diligence intact the minute that we start relying on stop losses and mechanical tools. That's the minute where we lose the human aspect of trading.

And that's the moment when we lose our analysis. and the hack with this is to simply set your trailing stop loss to execute you out at a break of directional strengths below or long-term read: SMA Line This allows you to make quick decisions one above the line, but protects you and automatically execute you out when you break below it. And if you want to be a little less aggressive with it, you can set it to 10% lower than our directional esta mail and so that it takes into consideration patterns of failed breakouts below it and you don't get faked out of positions. We don't want to be executed out just because a stock has a pattern of being too giddy and breaking below beat as the main line temporarily.

but we do want to be executed out if the direction goes kaput, and as traders, most of the lucrative are going to be in an upward direction territory anyways, so this is going to be an effective way to hedge risk. Well, what about swing trades? How should we set trailing stop losses on swing trades? I Know that a big appeal of swing trading is the fact that most positions don't require you to watch them all day unless it is easier to fit inside a schedule alongside a full time job or something like hunting for goblins all day. But how do you protect yourselves from changes in direction and how much is too much protection? Well, if we are looking at Tesla and are looking to take advantage of a change of direction over our directional SMA line, then we are likely buying in upon a failure to break upper direction and then monitoring it for several weeks for signs of a downward reversal. But since this is for multiple weeks we like.

You aren't going to catch a massive drop if it happens quickly. On this negative earnings report, the Tesla got beat down massively and broke its directional strength. So you need to declare a point at which you say enough is enough and for many people that would be a break of directional strength and that would be a sufficient worst case scenario exit point for your trailing stop loss. But what I'd actually recommend is setting a price alert when you are in a swing stock that falls more than 5% intraday.

This allows you to reassess the situation and then sell out before a breaks directional strike if you feel that the deprecating factors make it unreasonable to stay in the position. Okay, so what if you are in a stock that is oversold and are looking to get in at a discount that also happens to be way below the directional SMA one since it's trading below the directional SMA line already, you can't set it to sell out at below that we're already there. So where do you set your trailing stop loss then? well, if a stock is discounted or is an overreaction play because we know every reaction in the stock market is an overreaction in one way or the other. But if you'd like to take advantage of that and you were hedging your position on the fact that it is way below what it should be trading at, then that means that being proven wrong should convince you to exit out of the position.

If you enter. At this point and it drops 10 percent or more, then your hypothesis was proven wrong, and thus you should set your stop-loss to trail around 10% of your discounted entry point. But that doesn't mean you should wait until you lose the 10 percent. You need to use confirmation and validation to determine whether or not a stock you're entering makes sense, and whether it makes sense to stay in the position.

Simply buying in upon priced rates and selling out upon a break of strength is effective, but if it turns against you, you're going to need to be diligent and taking your profits or cutting your losses. Well, what about something like SMS I It ran up massively. This is what I like to call an inflamed banshee. But let's say that you discover this towards the end of the run up and want to take a position.

What point? Now do you set your stop-loss Well, quite frankly, it's at this point where we are so massively overextended over both the directional SMA line and the RSI that you better have one damn good reason for taking a position here. Maybe you have a specific catalyst. Maybe it's an FDA approval I Don't know. but if you take a position here, you are essentially betting that whatever catalyst that is pushing the stock up outweighs all of the massive, deprecating factors that I just identified.

And if you are betting this which I usually recommend, to avoid that I'd suggest making a stop loss that is at least 10 percent lower. If you are betting that this is going to be going up exponentially, then 10 percent lower should be the final point where you're like, okay, dammit, I was wrong I'm going to exit out at this point and if it drops really quickly like an inflamed banshee does, they run up really quickly and then the fire gets the Banshee and they start going down. If that happens about the 10 percent mark, you're going to be like, okay, well, now's the time to exit out of the position and your trailing stop loss will help you out with that. but otherwise you're going to be managing yourself manually.

and I Guess you could argue that this is a form of a mechanical static stop-loss if you're setting to a percentage of your execution price, wouldn't that just be a static number and the answer is sort of. But this is the execution price and not the price that you're hoping to get in at. So we're going to call it a trailing stop loss, but that may not be the fairest way to call it, but at least you know what I mean. Well anyways, folks, I do hope that this video was helpful.

Let me know in the comment section below what sort of stop-loss you like to employ or if you don't enjoy stop losses at all. If you have any questions, you can also comment below or reach out to us on our free zip creator Circle Facebook group. We post nightly watchlist on the Facebook group and we also have a free discord chat link in the description as well. And of course, if you would like to keep up to date with all of the latest videos, make sure to hit that subscribe button for more short sweet and simplified videos on how to trade the stock market Anyways, folks I Really pretty? You mean it? Have a great day and I'll see you in the next video.