A trailing stop is a feature of many trading applications which helps you lock in profits. The software will watch each of your positions. Each time one of your long positions goes up, the software adjusts your stop loss. If the prices moves back down a predetermined amount, you will hit the stop loss, and the software will automatically sell your stock. The software constantly compares the current price of each of your long positions the highest price since you owned the stock. Short positions work the same way, but the direction is reversed.
Trade-Ideas uses trailing stops as a model for some of our analysis. This allows us to examine price patterns completely independent of time. This is a unique form of analysis. Most back testing tools do not cover trailing stops because this type of analysis requires tick data.
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