Williams’ Three-Bar Trailing Stop for Trend Entries and Exits

Summary

This indicator description explains a three-bar trailing stop associated with Larry Williams. Its intended use is to stay with strong directional moves while tightening protection when a correction begins. The author recommends waiting until price has left a trading range and begun to trend before applying the stop, since using it in congestion can produce poor signals. The method is also presented as a possible entry trigger once the market is properly set up.

The accompanying code tracks a sequence of bars while accounting for inside bars, then calculates a local high and low over that sequence. A close beyond the prior range selects the opposite range boundary as the reference level. The text offers no empirical tests, parameter evaluation, or market-specific results, and it warns that an initial entry signal can be false before a trend resumes. Traders should treat the description as an indicator concept requiring independent validation, not as evidence of dependable performance.

Key ideas

• The stop is intended for markets that have moved beyond a trading range into a directional run.
• The method uses recent highs and lows while accounting for inside bars.
• A close beyond the prior range shifts the reference stop to the opposite boundary.
• The author presents the technique for both trailing exits and potential entries.
• The document provides no performance tests and cautions that early entries may fail.

Tags

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