Trailing Stops: How to Let Winners Run Without Giving It All Back
The classic trader dilemma: you're up 200 points, but when do you exit? Too early and you leave profit on the table. Too late and the reversal takes it all back. Trailing stops solve this — but only if you set them right.
What Is a Trailing Stop?
A trailing stop is a stop-loss that moves in your favour as the trade profits. It starts at a fixed distance from entry, then ratchets tighter as price moves your way — but never moves back. If price reverses, the stop stays where it was, locking in the gain at that point.
Example: you enter long at $100 with a 10-point trailing stop. Price rises to $130. Your stop is now at $120. Price drops to $122 — you're still in the trade. Price drops to $120 — you exit, locking in $20 of profit.
Points-Based Trailing
- ✓ Trails a fixed number of points behind current price.
- ✓ Simple to set. Easy to understand.
- ✗ Doesn't adapt to volatility. 20 points is tight on NATGAS, wide on EURUSD.
Percentage-Based Trailing
- ✓ Trails by a percentage of current price (e.g., 2%).
- ✓ Scales with the move — wider as price moves further.
- ✗ Still ignores market structure and volatility conditions.
ATR-Based Trailing
- ✓ Trails by N × ATR (Average True Range). E.g., 2 × ATR = 40 points when ATR is 20.
- ✓ Adapts to volatility — wider in volatile markets (NATGAS, crude oil), tighter in calm ones (EURUSD).
- ✓ The most robust approach for multi-instrument strategies.
- ✗ Requires ATR calculation. Not available on all platforms.
When to Use Trailing Stops
Trending markets: Trailing stops shine. You catch the bulk of the move and exit when the trend reverses. The Trend Follower risk profile in the Strategy Lab uses wide trailing stops specifically for this.
Ranging markets: Trailing stops get whipsawed. Price oscillates, the stop trails up, then the reversal triggers it — right before price goes back in your direction. Use fixed stops in ranges.
The Danger Zone
Trailing too tight: A 5-point trail on a 20-ATR instrument exits on the first noise wick. You bank a tiny profit and miss the big move. Frustrating and costly over time.
Trailing too wide: A 100-point trail on a 20-ATR instrument gives back most of your profit before the stop triggers. You made 200 points, gave back 100, and bank 100. The trade was right but the exit was wrong.
The sweet spot is usually 1.5–3 × ATR. Wide enough to survive normal pullbacks, tight enough to bank meaningful profit.
How TradeTestr Tests Trailing Stops
Every risk profile in the Strategy Lab has different trailing stop settings:
- • Trend Follower — trailing enabled, wide, no take-profit. Designed to ride trends.
- • Mean Reversion — trailing disabled, tight take-profit. Quick in and out.
- • Conservative/Standard/Aggressive — trailing disabled, fixed stop-loss only.
- • High Conviction — trailing disabled, wide stop, no take-profit. Let the thesis play out.
Check the Strategy Lab leaderboard — filter by strategy and see which trailing configurations make the top 20. Test the same setup on the backtester with your own trailing parameters.