I never tried this kind of trailing stop. You should even consider calling it “reverse trailing stop” because it is the opposite way the trailing stop is commonly used!
When you enter a trade you place your stop loss because you expect some retracements and want them not to affect your trade. If you fear your stop loss you either:
- placed the stop loss in a wrong place
- the trade was not worth while being initiated
Usually novice traders, in case they place a stop loss, tend to move it a bit further as the price moves aginst their trade, thus losing lots of money.
You want to do the opposite… move it towards the price with a high (? I really never tested it, just guessing) probability that it be hit, mainly while still below breakeven. Instead of suffering a bigger loss you’ll suffer a smaller one, but it would still be a loss and you don’t want to trade to lose!
I rarely use trailing stops, because they make me win less money, when I do. I don’t like breakeven as well, since I trade to win, not to even a match! But in case of automated strategies trailing stops may help scalpers gain some pips.
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