Setting Trailing Stop Loss Percentages

Using a Trailing Stop Loss (TSL) is one of the best ways to limit your downside and protect your winning trades. Instead of relying on your gut, here’s a straight-forward way to derive the appropriate TSL percentage for your trades.

ATR based TSL Percentage

ATR stands for Average True Range. It provides a measure of volatility that incorporates gap/limit moves. The range of a day’s trading is simply high – low. The true range extends it to yesterday’s closing price if it was outside of today’s range.1

To set a TSL percentage, just multiply the latest daily ATR value by 2 and divide by the previous close.

What you are doing here is simply attaching a risk tolerance level (2) based on the stock’s intra-day moves averaged over a period of time.


technical analysis chart

For example, if you were trading COLPAL 1,019.50 0.00 (0.00%) today, you would set the TSL to

2 * 30.5/1,250.65 = 4.88%

You can use StockViz to set a TSL alerts for your trades. Read this to see how.

If you enjoyed this post, please consider registering to get a weekly digest of our articles.
Get in touch with Shyam for advice on mutual funds. You can either WhatsApp him or call him at 080-2665-0232. He is an AMFI registered IFA who can advice you on Franklin, Blackrock, IDBI, Mirae, HDFC, ICICI Pru, UTI, Sundaram, Reliance, Religare, Peerless, Tata and Birla Sun Life funds.

Leave a Reply

Your email address will not be published. Required fields are marked *