Trailing Stop Loss Levels Forex Technical Analysis Forex Trading Signals
Developed by Tushar Chande.
This is a volatility based indicator that is used to estimate levels to set stop loss levels. The distance at which it estimates the trailing stop level is determined based on market volatility.
The Levels of the two lines, these two lines represent:
- Long Stop Level - Blue Line
- Short Stop Level - Red Line
The long stop level line has a much wider range than in terms of where it trails the stop loss as compared to the short stop level which implements a tight stop loss.
This indicator is volatility based when it comes to trailing and following the price action. Trailing Stop Levels will trail the above the price in a downward market trend and trails below the price in an upward market trend.
Technical Analysis and Generating Signals
These will be calculated using volatility to calculate where to plot the indicator - this is used to determine what levels to set stop losses.
In an upward trend these levels will follow below the currency price. The trader can use either the short stop level line to set up a tight stop or the long stop level to set a stop loss that is not very tight. As the price goes higher the trailing level also goes higher. An exit signal is generated when price crosses below these levels.
In a downward trend the stop loss levels will trail above the currency price this two levels can be used to set these levels. As the price drops further these levels will continue to drop lower and follow the price lower. An exit signal is generated when price crosses above these levels.
When price starts to retrace these levels will not retrace but will remain at their levels, this will mean at some point the trade will be closed by the trailing stop loss.