How to Calculate Trailing Stop Loss Order Setting

A trailing stop loss order setting level can be calculated using indicators such as the Parabolic SAR indicator.

If the trading market rises by a set number of pips the parabolic SAR technical indicator then adjusts the trailing stop loss level upward accordingly.

Also if the trading market falls by a set number of pips the parabolic SAR indicator then adjusts the trailing stop loss level downwards accordingly.

Parabolic SAR Indicator

Parabolic SAR is used by stock traders to set trailing price stop loss zones

Parabolic SAR provides good exit points which keep trailing the price on a chart.

In an upwards trend, you should close long trade positions when the price falls below the parabolic SAR

In a downward trend, you should close short trade positions when the price rises above the parabolic SAR.

Parabolic SAR - Technical Indicator for Placing Trailing SL Order Levels

Bollinger Bands Indicator

Bollinger bands indicator use standard deviation indicator as a measure of price volatility. Since standard deviation indicator is a measure of volatility, bands are self adjusting which means they widen during the periods of higher volatility and contract during the periods of lower volatility.

Bollinger Band consist of Three bands designed to encompass the majority of a instruments trading price action. The middle band is the one that forms a basis for the intermediate term trend, typically it is 20 period simple moving average, which is also the base for upper and lower bands. The upper band's distance and lower band's distance from the middle band is determined by volatility of price.

Since these bollinger bands are used to encompass the trading instrument price action, the bands can be used by traders to set stop losses just around the area outside of these bands.

Setting Trailing Stop Loss Order Level using Bollinger Bands Indicator