Whether it is a long-term investment or a short-term trade, it is important to both decide the appropriate time to exit a position, as well as determine the best time to enter into the position.

The Trailing Stop

They may appear similar as they both equally provide protection towards your capital if a  price were to move against you; however, that is all that is similar between a trailing stop and a regular stop.

When compared to a fixed stop loss, a trailing stop has more advantage in the sense that it is much more flexible, allowing traders to continue to protect their capital even if there is a price drop. Once the price picks up and increases, the trailing feature takes place to protect the profit while reducing capital risk.



To illustrate how trailing stops work, take for instance the trailing value is either at a fixed percentage of 5% or a fixed spread of 35 cents. Regardless, the trailing stop will follow the day’s high by the predefined amount. However, the thing to note is that once the trailing value is set, it cannot fall back, and even if the last price drops lower than the trailing stop value, the stop loss will be triggered, preventing loss.

The Parabolic Stop and Reverse (SAR)

Using the parabolic stop and reverse (SAR) technique, one can place stop-loss on both sides of the market so the movement is incremental each day with the changes in price. The SAR is in fact a technical indicator that is plotted along a price chart, occasionally intersecting with price when there is a reversal or loss of momentum in the security involved. When an intersection occurs, the trade is considered stopped out, creating an opportunity to take on the other side of the market.

Using an example to explain this, when your position is stopped out, the security will be sold, leaving the position closed. This allows you to sell short with a trailing stop immediately on the opposite (parabolic) to the level where you were stopped out in your position on the other side of the market earlier. Basically, the SAR technique allows a person to capture both sides of the market as a security faces fluctuation over time.

The major proviso of the SAR system is the erratic fluctuations of a security. When the price of the security fluctuates very quickly, the trailing stops will be triggered as well each time, making it difficult to achieve sufficient profits. In other words, your trading commissions and other costs will be greater than the little profitability you gain from a choppy market.

The second proviso of SAR is a security that does not show a significant trend. A trend that is too weak will make it impossible for the stop to reach, so your profits will not be locked in. Hence, the SAR is not suitable for securities that lacks trends or has trends that fluctuate back and forth too quickly. However, the SAR makes a perfect choice when it comes to determining your levels of trailing stops if you are able to identify opportunities between the extremes.

Universal Trailing Stop Expert Advisors

Universal Trailing Stop Expert Advisors included:
a) Standard Trailing: simple trailing, stoploss follows by the market
b) High/Low Trailing: trailing by bars High/Low
c) ATR Trailing: trailing by ATR indicator
d) Fractals Trailing: trailing by Upper/Lower Fractals
e) PSAR Trailing: trailing by Parabolic Stop And Reverse indicator
f) ProfitPcnt Trailing: trailing with lock of some pcnt of max. profit reached
g) TrendLine Trailing
h) MovingAverage Trailing
a) Standard Trailing: simple trailing, stoploss follows by the market
b) High/Low Trailing: trailing by bars High/Low
c) ATR Trailing: trailing by ATR indicator
d) Fractals Trailing: trailing by Upper/Lower Fractals
e) PSAR Trailing: trailing by Parabolic Stop And Reverse indicator
f) ProfitPcnt Trailing: trailing with lock of some pcnt of max. profit reached
g) TrendLine Trailing
h) MovingAverage Trailing

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