Trailing Stop Loss Indices Order Definition Explained with Examples
A trailing stop-loss is a stop loss zones that keeps adjusting itself automatically by set number of pips once the stock indices trading market moves in direction of the trader's open trade by a number of pips.
For example the trailing stop can be set at 30 pips & set to adjust itself to 30 pips automatically once the indices price moves upward by 5 or 10 pips. This means that this trailing stop loss stock indices order will keep trailing the stock indices price as long as the stock indices price keeps moving in direction of the trader's open position.
This trailing stop-loss will close out the order once the stock indices market starts to retrace & it retraces to the level of the most recent set trailing stop-loss level.
A good indicator used to set trailing stop-loss levels is Parabolic SAR technical indicator:
Parabolic SAR Technical Indicator
Parabolic SAR is used by stock indices traders to set trailing stock indices trading price stop loss zones
Parabolic SAR provides good exit points which keep trailing the stock indices price on a stock indices chart.
In an upwards indices trend, you should close long trade positions when the stock indices price falls below the parabolic SAR
In a downward indices trend, you should close short trade positions when the stock indices price rises above the parabolic SAR.
If you are trading long then the stock indices price is above parabolic SAR, parabolic SAR will move up everyday, regardless of the direction in which the stock indices price is moving. The amount the parabolic SAR moves upwards depends on amount that stock indices prices moves. Once stock indices price moves below the parabolic SAR as shown on the stock indices trading example explained and illustrated below, then traders should close their open buy stock indices trades at trailing stop level provided by Parabolic SAR +technical indicator.
Parabolic SAR - Stock Indices Technical Indicator for Setting Trailing Stop Loss Indices Order Levels
