Trailing Stop Question

[mikegillespie07]

Hi,

Can you help me understand why the trailing stop didn't trigger in this trade? This is the second trade a row where it didn't trigger. Galileo went short at 1.05170. Red arrow - 7 candles in from the right edge. You can see the initial stop lost at 1.05350 (225 points per strategy) at the top. I would expect the trailing stop to trigger when price reached 1.05075 (95 points lower - per strategy) and set a trailing stop at 1.05300 (225 + 1.05075) but it didn't. The low on the down candle 4 in from the right is 1.04940. What am I missing in order to get the trailing stop to trigger? Thanks!

 

[Chris]

Great question, let me break it down for you:

1. What is a Trailing Stop?​

A trailing stop is a dynamic type of stop loss that automatically adjusts as the market price moves in your favor. It is designed to:

• Protect profits by locking them in as the trade becomes more profitable.
• Limit losses if the market turns against your position.

How it works:


Suppose you open a buy position at 1.1000 and set a trailing stop of 10 pips:

• If the price rises to 1.1010, the stop loss moves up to 1.1000.
• If the price continues to 1.1020, the stop moves up to 1.1010.
• If the price then falls to 1.1010, the trade closes — locking in the profit.

However, if the price never rises and instead drops immediately, the trade will close when the stop is hit, limiting the loss.


Key point: The trailing stop only moves in the direction of profit, never backward.

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2. What are Trailing Steps?​

Trailing steps define how frequently the trailing stop adjusts as the price moves in your favor.


Example:

• With a trailing stop of 10 pips and a trailing step of 1 pip, the stop loss moves every time the market moves 1 pip in your favor.
• If you use a trailing step of 5 pips, the stop loss only moves after every 5-pip increase in price.

This parameter allows you to control the sensitivity of the trailing stop:

• Smaller trailing step = more responsive, tighter stop.
• Larger trailing step = slower adjustment, more breathing room for market fluctuations.