The trail distance is the entire decision
A trailing stop is not a feature you switch on but a number you choose, and the number is everything. Trail too tight and ordinary pullbacks stop you out, turning a large trend into a small gain; trail too wide and you hand back much of the move before it triggers.
The right yardstick is not a comfortable round number but the instrument's own volatility: a trail narrower than the ordinary daily range will be hit by noise alone. This is why trails are usually built on a multiple of ATR rather than a fixed figure.
The same dollar through each control
The reference account for this family: $1,000, risking 1% — $10 a trade — on 0.01 lots of gold, where $1 of price is $1 of money. A $10 stop distance is therefore exactly 1% of the account.
Every page here follows that same dollar through a different control: how much I risk, when I remove the risk, and how many losses the account can absorb before it is finished.
A worked example
Buy gold at 2,400 with a $20 trail. Price rises to 2,440 and the stop lifts to 2,420 — $20 of profit is now locked. It continues to 2,470 and the stop becomes 2,450. A pullback to 2,450 then exits you at $50 per ounce of profit.
With a $10 trail instead, the first pullback near 2,430 would have exited you at $30, even though the move reached 2,470. The distance did not change the market; it changed your share of it — which is why it must be set by measuring volatility rather than by comfort.
Common mistakes with this term
- Choosing a trail narrower than the ordinary daily range, so market noise ejects you from good trends.
- Enabling it from entry before any gain exists, so it behaves as a tight stop rather than a profit protector.
- Assuming it guarantees an exit at the trailed price; it is a stop order and becomes a market order on trigger.