Trailing stop
A trailing stop is a stop loss that follows the price as a trade moves in your favour. For a long position it rises as the price makes new highs; for a short, it falls as the price makes new lows. It never moves back. When the price turns and reaches the stop, the position closes with part of the move kept.
Common kinds
- Percent trail: the stop stays a fixed percent behind the best price since entry.
- R ladder: R is the distance between the entry and the first stop. Once the trade reaches a start level, the stop moves to the entry, then moves up one step each time the price moves another step.
- Activation level: the trail starts only after the trade has moved a set distance in your favour. Until then the original stop stays in place.
Trade-offs
A tight trail protects more of a gain but is hit by normal price noise. A wide trail gives a trend room but gives back more before it closes. The right distance depends on the market and the timeframe, which is why trails should be backtested.
On Algonney
A strategy can use a percent trail with an optional activation level, or an R ladder. On Bybit USDT perpetuals the trailing stop runs natively on the exchange; elsewhere the guard sends each move to the exchange and applies it only after the exchange confirms it. The stop never moves backward.
Related: stop loss, take profit, Trailing stop bot and Automated crypto trading bots.