Searching Understanding Trailing Stop Loss

[shanmugapradeep]

Hello,

I am finding little difficult in understanding Trailing Stop loss. How does it work, does it take value from Stop Limit, Trade Entry Price or Current Price or Highest Peak in Favorable direction.

After reading some blogs about Trailing Stop, This what i understand :

1. Condition: If the current price is greater than the entry price.
2. Condition: If the difference between the current price and the entry price is greater than the trailing stop value.
3. Action: Set a new stop loss level at the current highest price minus the trailing stop value.
4. Additional Condition(favorable direction): If the difference between the new stop loss level and the current price is greater than the trailing stop value.
5. Additional Action (favorable direction): Set a new stop loss level at the current price minus the trailing stop value.

Is this correct?

 

[4evermaat]

Sounds about right. But you might need a cooloff of xxxx milliseconds (4000) after favorable direction is detected so that you do not sent too many requests to the server for each tick that your condition is true. you can make this cooloff before updating the stop loss, or afterwards.

 

[Samuaritig]

Yes, your understanding of trailing stop loss seems generally accurate. The key idea behind a trailing stop is to lock in profits as the market moves in your favour while allowing room for minor retracements.