Percent-Based Trailing Stops with Direction Reversals

Summary

This note describes a trailing stop indicator that sets long and short thresholds as a percentage of each bar’s high and low. While a position direction continues, its stop is updated to move with price; a crossing of the active stop switches the direction. The author also adds a second plotted line offset from the main stop to make a visual band.

The document provides indicator logic but no backtest, performance evidence, or guidance on choosing the percentage beyond noting an input and a median-term range. It does not specify the asset, bar interval, execution assumptions, or how to handle gaps and transaction costs. The thresholds use current bar highs and lows, so practical use depends on when those values are known and how the indicator is evaluated. Treat it as a charting and stop-placement concept rather than evidence of a profitable trading system.

Key ideas

• The indicator calculates long and short stop levels from a percentage of each bar’s high and low.
• The active stop trails price while the current direction remains in force.
• Crossing the active threshold reverses the indicator’s direction.
• A second plotted line offsets the stop to form a visual band.
• The document offers no empirical evidence that the indicator improves trading results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.