April 29, 2020

Advancing stop orders in the direction of a profitable trade

I get many questions on my practice of actively and aggressively moving protective stops in the direction
of a profitable trade.

 What technique do I use to advance stops?

 How do I know when it is time to move stops?
 How do I decide the pivots to use?
 What was the reason behind this pivot rather than that pivot?
 How quickly after I enter a trade do I move a stop?

I absolutely love the curiosity of the Factor Community, yet, I very respectfully suggest that these are
ALL wrong questions because they deal with technique rather than overarching purpose.

Every component of a trading approach must be addressed with a decision process. For me, the matrix
looks something like this.
Provide a living for
Purpose of
my family. Build
speculation wealth

↓
Efficiently utilize
Broad trading
capital through
philosophies leveraged vehicle

↓
Cut losses quickly,
Trading
let winners run,
principles minimize DDs

↓
Achieve 3.0+ Profit
Factor; 2.5 avg
Trading Gain/Loss ratio;
objectives keep sequential
closed trade NAV
climbing

↓
Move stops quickly
Trading
to BE, keep moving
tactics stops on a tranche

Trading tactics fulfill a mission; they are not a means to themselves and cannot be properly understood
out of context. Attempting to intuit my stop advancement decisions is the wrong pursuit for members of
the Factor service.

www.PeterLBrandt.com / @PeterLBrandt
So, what practical insight might be applicable for those of you attempting to understand my trading
method? Let me identify three insights.

 Coming up with trading tactics for the purpose of coming up with trading tactics is not a very
good use of time and energy. Time is much better spent answering the bigger questions of
market speculation. Tactics should be the natural progression of working your way through
more significant issues.
 There is NO magic in the way I use a sequence of minor daily reaction lows (or highs), daily lows
(or highs), unfilled gaps, or intermediate intraday reaction lows (highs) to squeeze my protective
stops. I have no idea if my method optimizes the outcome.
 All I know is that I want to take what the market gives me until the market hiccups from a swing
trading point-of-view. My guess is that most of you could come up with a better, more
consistently logical, way of advancing stops.

It would not be proper to leave this topic without addressing a couple of things.

 I would not be able to manage my trades like I do if getting stopped out of trades (and stopped
out of trades all the time) bothered me. Active and aggressive trade management is not for you
if being stopped out of trades is the equivalent of failure in your mind.
 Active and aggressive trade management is not for you if you would be emotionally affected in a
negative way by being stopped out of a trade you really want to be in only to see the market do
what you thought it would do.

It bothers me a little to constantly be stopped out of trades because my eyes are on the sequential
closed trade NAV line. If I keep that line marching north all the other metrics fall into line – acceptable
profitability, target Profit Factor, limited drawdowns. These are my goals.

Being really right on the analysis of my next trade and holding a positions from the start to the finish –
sure, that’s nice, but that’s not how I will measure my performance.

plb

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