Aggressive SmartStops are designed to provide maximum downside protection and typically lie closer to the current price of the stock or ETF. Let’s compare the different ATR values and how they respond to price changes. When the last price reached $90.21, the stop-loss was canceled, as the trailing stop took over. A trailing stop loss is better than a traditional (loss from purchase price) stop-loss strategy 3. In the example below, the trailing stop is set at 6%. by SmartStops Team | May 31, 2020 | Self-Directed Investors. If you are learning how to make your first trades or mastering a new strategy then an eToro demo account is a great place to practice. Online brokers are constantly on the lookout for ways to limit investor losses. The are articles from people to say use a 8%, 10%, 15% or 20% trailing stop percentage. Keep in mind that all stocks seem to experience resistance at a price ending in ".00m" and also at ".50," although not as strongly. And should you use the same one for all stocks regardless of their price points? But unfortunately that is the least intelligent way to approach the subject. To better understand how trailing stops work, consider a stock with the following data: If the market price climbs to $10.97, your trailing stop value will rise to $10.77. If the trailing stop is placed on a buy trade, it will rise as the price rises while maintaining the set distance. It works well when automated, as it can work independently even when you are not monitoring your trades. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Using Percentage For Trailing Stop Loss. The best trailing stop-loss percentage to use is either 15% or 20% 4. Then when the price finally stops rising, the new stop-loss price remains at the level it was dragged to, thus automatically protecting an investor's downside, while locking in profits as the price reaches new highs. The net gain would be $0.75 per share, less commissions, of course. For example, you can use the ATR values on the hourly chart if you want to hold the trade intra-day or for a few days. The main advantage of the ATR trailing stop is that it moves with the price and locks in profits on open trades. The MA works in much the same way as the ATR indicator, but you cannot have multiple MA, as is the case with the ATR. © 2008-2020 Accionet, LLC. ANSWER: NO. With this in mind, let’s move on to potential trailing stop-loss strategies to deploy in your trading strategy. However, the trailing stop-limit remains fixed if the price reverses and starts moving in the opposite direction. Here's how it works. A trailing stop-limit ensures that you get the price you requested or better, unlike a trailing stop-loss order, which could be filled at a worse price than you wanted. A stop order is an order type that is triggered when the price of a security reaches the stop price level.