Abbreviation: TrailPricePnts
Category: Trading Strategy: Protective Stops
Input Parameters:

 
Calculation:

For a long position,
= Best Price – Points Trailing

Best Price = maximum High Price since the position was entered 

For a short position,
= Best Price + Points Trailing

Best Price = minimum Low Price since the position was entered 

 
Discussion:

This indicator is useful for creating a trading strategy trailing stop that trails price movement by a specified number of price points.

Example:

If your entry price is 100 and your Points Trailing is 10 then:

for a long position, a stop is placed at 90 initially and it will change if the issue increases in value. The value of the trailing stop will be 10 points below the best price since the entry price. This means that if the stock climbs to 110, the trailing stop will be calculated to be 100 (10 points below 110). Once the stop is placed at 100 it will never go down. The stop order will be activated once the price drops down to the value of the trailing stop, at which point you will exit your long position.

for a short position, a stop is placed at 110 initially and it will change if the issue decreases in value. The value of the trailing stop will be 10 points above the lowest price since the entry price. This means that if the stock falls to 90, the trailing stop will be calculated to be 100 (10 points above 90). Once the stop is placed at 100 it will never go up. The stop order will be activated once the price rises to the value of the trailing stop, at which point you will exit your short position.