Trailing stop mechanics: what exactly do you trail?
Trailing sounds simple; the mechanics are not. A fixed pip trail ignores volatility; a swing-based trail gives back different amounts in different regimes; a moving-average trail lags by design.
Describe your trail:
- the reference you trail (swing, MA, ATR, fixed pips)
- how often you update it
- the regime where your trail underperforms
The ATR guide gives the volatility-aware version.
Background: Trailing stops: how they move and where they fail
A trailing stop moves with price in your favour and never backwards. Here is how to set the distance, why it can fill at a worse price, and when it does more harm than good.
What is a trailing stop?
A stop-loss that moves with price in the direction of a trade by a set distance, and does not move back against it.
Why does a trailing stop fill at a different price?
Once triggered, it becomes a market order, so the fill depends on the market at that moment. In fast markets or after a gap it can differ from the stop price.
Comments
Log in to join the discussion. Comments follow the community guidelines.
Log in to commentLoading comments…