Anyone heard of " Count back line approach" used as a stop loss ?

[kiwikiwi]

Hi ,

I am just reading a book by Daryl Guppy called "Better Stock trading ".
He uses a " Count back line approach " to set his stop loss price.
Would love to know what that is.
Can anybody enlighten me on that.?

Thanks for that.

 

[Quercus]

Hi kiwikiwi, and welcome to the site.
When in a long losition, if trading over a period of days/weeks/months, from the latest high bar place a line at the low and extend it back to the first bar that it touches. From this bar, again take the low and extend this back to the first bar that it touches. The low of this bar is your trailing stop loss, and will remain your stop until a new high is made, at which point you carry out the same procedure again. Unless of course you are stopped out! 🙄
You would be wise to look back over a course of time to see if this mehtod is applicable to the stock you are considering applying it to. This is to see if the method keeps you in more trades than it stops you out. It is only one method of trailing a stop, and is not appropriate to each and every instrument.
Hope this helps.
Cheers
Quercus

 

[kiwikiwi]

Thank you ,Quercus

Thank you for that.

Just a silly question on this one, ( I am trying to get the just of it )

With that system, would you use the Bar chart High,.Low,.Close. ?
Or just today’s close?
And
Do you use "today’s data" and use today’s low, to draw a line back .?
For example : Presume a stock opened today at $0.47 went as low as $0.45 and closed at $0.50
The method would be, to use the low of $0.45 ( today’s) draw a line back in time ,till it hits something and use that days low, as your "Stop loss figure "
Am I on track with my presumption ?

Thanks for your help .

 

[Quercus]

Your presumptions are correct, provided the high/close of .50 is the most recent high on the daily chart, however the method calls for this to be done twice, not once as you are suggesting. So once you have found the low of the first bar to be hit, this is "counted back" to the next bar to be hit, and it is the LOW of this bar which is used as the stop.
Most times traders will only act on the stop if the daily bar CLOSES below the stop loss level. Again, you need to look at the stocks in detail, as to how they would have behaved in the past, if this method had been applied. It's all about rules, and their continued assessment/adaptation!

 

[kiwikiwi]

Got it.

Thanks for that, I think I got the just of it. :idea:
You are right, just had a look at some ASX charts, and it could work just nicely with some, but not with all of them.

Thanks again.

" Rules and Regulations are only made for people, that follow them "