Trailing stops: protecting profit without strangling the trade

ATR trailing (also called a Chandelier stop) keeps the stop a multiple of current volatility behind the highest high since entry. It automatically widens in fast markets and tightens in quiet ones.

R-step trailing moves the stop in discrete jumps: at +1R the stop goes to break-even, at +2R it goes to +1R, and so on. It is cruder but completely predictable, and it is easy to replicate manually or in an EA.

We currently run ATR trailing at 1.5× activating at 1R, with break-even at the first take-profit. We arrived there by running an optimiser sweep across both modes and multiple multipliers on the same history.

A 1.5× trail combined with loosened entry gates once produced a stretch of losses: the stop was tight enough that ordinary gold noise closed trades that later ran to target. A backtest sweep then showed half that distance — 1.0× ATR plus a 12-pip buffer — cut the worst drawdown while keeping the trade count, so that became the default. Trailing settings and entry settings are not independent.

Moving to break-even feels safe, but on gold it converts a meaningful share of eventual winners into scratches. We only do it after the first take-profit has already banked 50% of the position, so the trade is already net positive before the stop tightens.

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