Ask Colin

I currently use pivot point lows as my trailing stop, but they do not always appear. What else can I do?

A trend can be as short as one bar. When a trend ends and another starts, there is always a pivot point reversal. However, as you say, in very fast moving markets, there are not always these smaller counter trends under which to place a trailing stop.

My first recourse in these markets is a simple trend reversal in the shortest time frame - a bar with a lower low and a lower high. However, before a trend reversal occurs you may get a warning signal such as: an open/close reversal, a closing price reversal, a key reversal, a hook reversal, an island reversal or a pivot point reversal. I might also act on an inside day or an outside day, which are not reversal signals, but warnings of possible loss of control by buyers. All of these are described in the Stockwatch articles on my subscription web site and taught in E114 Technical Analysis at the Securities Institute of Australia (see my free access wen site Ask Colin/Education).

It is also possible to use a short term trend line, which tells you of a loss of momentum. Other momentum oscillators could be used also.

For a very fast moving market, I use any of the short term reversal signals or I use the Parabolic SAR indicator in the absence of support levels forming on the chart. I have described this use of Parabolic SAR in an article in Shares magazine, which is on my subscription web site.

These may all be premature, but there is no way to always pick the top. You can always get back in if the trend reasserts itself.

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