As a day trader you already know that one of the cardinal rules to be successful is money management, and in particular, open position management. Many traders know how to set protective stop losses to in case a trade does not work out in their favor, but knowing how to set stop losses on profitable open positions can be a bit more tricky. To understand why properly managing your "stop-out" point on a profitable open position is important, simply ask yourself one question.
Ask yourself how much more profit would you have in your day trading account if you were able to recover just 1% of the money you "gave back" from each trade's maximum profit to the amount you actually made when you closed out the position. Over the course of most day traders' careers, just recovering 1% of your "give back" amounts would be a significant amount of money! The key to begin to recover some of your "give back" profits is to master trailing stops.
One of the reasons trailing stops on open positions is difficult for most traders to use is because many software programs offer trailing stop amounts in fixed units of dollars. In other words you can set a 20-cent trailing stop, a one-dollar trailing stop, etc. Most stocks, however, fluctuate on a percentage basis. For example, a $70 stock which normally fluctuates 25 cents without taking out a previous intraday high or low would have a normal (regular) fluctuation of 0.36% ($0.25 divided by $70.00). Yet a $10.00 stock with a normal intraday fluctuation of 8 cents without taking out a previous intraday high or low would have a normal (regular) fluctuation of 0.80% ($0.08/$10.00). Assuming you used position sizing to have equal dollar amounts per open position, you can see that the $10 stock in this example could be riskier than the $70 stock. It all depends on the individual tendencies of the particular stock.
One way to gain an edge on your competition, and possibly compete against the computer algorithms which drive much of today's intraday trading, consider analyzing the tendencies of the stocks which you normally trade. Define a percentage limit of how much "acceptable" fluctuation you can accept on a regular basis. For example, if you can accept no more than 0.40% of regular fluctuation (your acceptable "give back" amount) then find software which allows you to set percentage trailing stops. Select stocks which have normal fluctuations less than (or equal to) the give back amount. Then set the percentage stop to just slightly more than your accepted percentage, such as 0.45% in this example, to account for slippage.
If your software does not allow for percentage trailing stops, then keep a calculator near your computer if you cannot quickly calculate percentages in your head. Some day traders even print out a small conversion chart to estimate trailing stop percentages and tape it on their monitor. Whatever you decide, consider analyzing your stocks' regular fluctuations (the regular amount between intraday swing highs and lows) and set percentage trailing stops accordingly. Hopefully this practice will help you maintain more of your profits on open positions.