How to code a TRAILING STOP LOSS in Pine Script

hey Traders thanks for tuning in
spending some time with me today we are
going to be exploring various methods
for creating trailing stops in Pine
script so for today's example we're not
going to actually work with a strategy
script per se this is a strategy script
but it doesn't actually have entry
criteria or exit criteria other than the
trailing stop and we need to click on a
candle in order to enter the trade so
today's lesson is purely about trailing
stops now I did this for a reason that's
because the code for this script is not
exactly short and so it's going to take
some time to break down the various
methods we can use for trailing our stop
loss in Pine script so without any
further Ado let's get started now what
you see on my chart right now is a ATR
based trailing stop that is trailing our
stop-loss one ATR below swing lows and
so long as price continues moving in our
favor the stop loss will only ever move
up to lock in profits until it gets hit
by Price action and exits our trade for
hopefully a profit now that's not the
only method we could use we could use
percentage-based trailing stops we can
use trailing stops based on candle
closes or candle opens and in today's
lesson I'm going to show you all those
different methods so to begin with here
is my script template we've got a bunch
of user inputs here I'll show them in
the settings menu that might be easier
we just have a few drop down boxes and
some parameter inputs so we have the
direction we want to trade long or short
we have the trailing price source so
This is Swing Low swing highs the
closing price for the open price we have
our trailing stop method so that's going
to be either an ATR bass stop or a
percentage based up there are many many
other different variations of trailing
stops but these are the two most common
and perhaps we'll cover future ones in
future videos like the parabolic SAR and
there's so many different trailing
methods standard deviations it's crazy
how many different methods there are so
for today we'll stick with the basics
and in future videos maybe we'll
elaborate on the different methods
because the principles are all the same
this script can be adapted to work with
pretty much any trailing stop method
next up we have our trailing percent so
this is the percentage value to Trail
above below the price action after we
enter a trade then we have our look back
period for swing highs and swing lows
then we have our ATR period for
calculating the ETR and then we have an
ATR multiplier so by default this is set
to one but if I set this to three then
we would be trailing three atrs above or
below price action and then the final
input here isn't one we should really be
touching you can if you want to but this
is just here because if you set confirm
to True with a parameter a user input
parameter then when you add the script
to your chart for a Time input in
particular training view makes you
select a bar at bar time so I'll show
you what I mean if I click add to chart
you see this vertical line here this is
allowing me to set the bar we want to
enter our trade on so that's just a
matter of convenience here just for
demonstration purposes it makes it
really easy and quick for us to select
the bar to start trailing our stop-loss
from if you were to add the code we're
going to build in the script to your
scripts you would ignore this input
and simply use whatever strategy entry
criteria your strategy uses so anyway
that's our user inputs you'll notice
they all have confirmed set to true so
that when we add the script to our chart
for the first time the user has to
select each value for each parameter so
I'll show you again if I click add to
chart and I click on something this pops
up and I can simply click apply and that
will apply with all the default values
or I can select short I can change my
trailing Source price My Method my
percentage Etc finally the last thing to
mention with the user inputs that is a
little bit out of the ordinary that you
might not have seen before if you're new
to the channel or new to Pine scripts is
this here these options parameters allow
us to specify a list of options so again
if I add this to my chart and come up to
the settings you can see these drop down
boxes with the options in order to use
these you need to specify a list of
options we use the square brackets to
add identify the list or encapsulate the
list we use commas in between each list
item each list item must be in
quotations and your default value must
be one of the options you can't have a
default value that is not selectable
from your options so with all that out
of the way let's get into the trailing
stop code so the first thing we need to
do is enter a trade so that I can
demonstrate how to use this method with
strategy scripts because that's probably
the most common use case for this you
can make indicators that can help you
manage open positions but most of you
will want to backtest trailing stop
methods in your strategy script so
that's what we're doing today so to do
that we just enter a trade
if the bar time is greater than or equal
to the bar time we select when we add
the script to our chart and our position
size must be zero so we must be flat no
open trades and we must have not closed
any trades otherwise when our training
stop gets hit the script will
immediately open a new trade and we'll
just have lines all over our chart which
makes it harder to demonstrate my point
today so no trades can be open and the
bar must be the bar we clicked on and
then if that's if that condition is met
we enter a trade with a trade ID of
trade a direction now our direction is
set to is trade type equal to long if so
we set our direction to strategy.long
otherwise if it's not long it can only
be short so we set it to short and trade
type is this user input here trade
Direction all right so now we've entered
our trade let's start calculating our
trailing stock so I'm going to copy and
paste code over to save time and explain
it as I go first block of code here is
just decl layering our trailing price
variables which stores our trailing stop
value so this first value here is a VAR
keyword float type and it's going to be
the price value that our actual trailing
stop is now it's set to VAR because we
want it to be persistent across all the
bars on our chart we don't want this to
reset on every bar that prints onto our
chart we want to save this value because
that's the point of having a trailing
stop that this next value however is the
next trailing price that we calculate
and we want to check if this next Trail
price is higher than this Trail price in
the case of a long trade because we only
want to Trail our stop loss up we don't
want it going down because that defeats
the purpose of a trailing stop and it
will never be hit
so in the case of a long trade we want
to evaluate our next potential trailing
stop so that might be one ATR below a
swing low and if that value is higher
than our save value then we want to
update our saved value and so this
variable we want to reset on every new
bar because it's a new calculation on
each bar this one we don't so that's why
it's a VAR variable so next up let's get
the required trailing stop variables so
the first thing we get is our ATR value
and that's just getting the inbuilt ATR
value from the technical analysis
Library ta dot ATR we pass in our ATR
period setting and we multiply it by our
ATR multiplier setting and this is the
value we will subtract or add to our
trailing price Source the next two
variables we get here are just our swing
lows and swing highs so to keep things
simple we're just using the TA dot
lowest low over our look back period so
that is seven Bars by default so we will
be looking back seven bars to find the
lowest low and seven bars to find the
highest high and then we can use these
values to calculate our trending stop if
we are using swing low and swing highs
as our price Source all right so now is
where things get a little bit
complicated so if you haven't been
following this up until now and you're
new to Pine script and this was already
complicated for you I highly highly
encourage you to check out my free Pine
script Basics course at
pinescriptmastery.com that will help you
help show you the ropes because
um this is all pretty basic stuff when
it comes to plan script if you're brand
new this is probably going to make your
head explode but I promise you if you go
through the basics course by the end of
that course you'll have a much much
better understanding of what's Happening
Here but anyway for those of you who
have been following along so far here we
go
this block of code here is getting our
trailing stock price now I might have
been able to make this code more
readable if I'd used if statements but I
thought this was a good opportunity to
show you guys how to use switch
statements or switch operators and so
don't worry if this looks like gibberish
to you and you haven't used the switch
before I'll break it all down it's
actually quite simple so the first thing
we're doing is we're checking if our
trailing method is equal to ATR so that
is this setting here
so if this is selected as ATR then this
code gets run or executed and what we're
doing is we're setting our next Trail
price this is the one we want to
evaluate against our existing trailing
price this is being set to a switch
operation and how this works is
we start with the switch keyword and
then we pass in a value we want to
switch through and so this is like a
bunch of nested if statements so an
easier way to explain this might be to
open this up so in this case we're using
Trail source so that's this user input
here and if I click on this drop down
box what our switch statement is doing
or switch operation is doing is it's
switching through each of these so it's
called a switch because it's literally
like
switching from one to two to three and
we're evaluating Trail Source whatever
this value is against
these values here
and so if Trail source is equal to close
then this line of code is run if it's
not equal to close then it moves down to
the next switch which is open so if
Trail source is equal to open then this
code is run
and then finally the default switch is
this here where you can see we don't
have any text
preceding this equals right arrow sign
which means if this value the value of
Trail source is not equal to close or
open then this line gets executed and
the reason this works is because we only
have three options we have lows highs
close and open and so if our Trail
Source value
is not closed and it's not open it can
only be lows and highs that's the last
option remaining and so this line of
code here calculates our next trailing
price based on swing lows and swing
highs now remember this first switch
operation is occurring under this if
statement so this is all calculating ATR
trailing stop values and so the first
one is a closing price so what we do
here if we have selected close as our
trailing Source price then we check is
our strategy.position size greater than
zero that means we are long if we have a
positive position size we are in a long
trade and so we want to subtract our ATR
value
from the closing price otherwise if our
position size is not greater than zero
then if we're using a trailing stop that
means that our position size must be
negative it could also be zero but to
keep things simple it doesn't really
matter because our trailing price only
comes into effect if our position size
is not equal to zero we'll get to that
later so if our position size is greater
than zero we subtract our ATR value from
the close otherwise we're in a short
trade which means we want to Trail our
stop loss down which means we need to
add the trailing stop to our bar close
and then we do exactly the same thing
for our opening price exactly the same
code except we're adding the ATR value
to the open instead of the close and
remember our ATR values already
calculated and taking into account our
ATR period and our ACR multiplier so
this line of code really simplifies
things makes our code more readable so
that's the close and the open the final
default switch
output here is the same check are we in
a long trade if so
we want to subtract the ATR value from
our swing low
value which is the lowest low over our
look back period otherwise if we're not
in a long trade then we're in a short
trade and we want to add the ATR value
to our swing high so that's it for our
ATR trailing stop price later on we need
to compare our next Trail price to our
existing Trail price and then set trail
price to this if it is moving up or down
in the case of a short trade so that's
our ETR values out of the way the next
if statement here we have an else if so
if our Trail method is not ATR then else
gets executed and what we say here is if
Trail method is not ATR if Trail method
is percent
so if we haven't selected ATR have we
selected percent now I could get rid of
this entirely it's a kind of a redundant
check because we only have two options
here it can only be 80 or percent but
I'm going to leave this in here because
it makes it easier to just copy and
paste this block of code if you want to
add other Trail methods to this list so
I'll leave this in for now and so this
next if statement here what I've
highlighted is exactly the same as this
except that instead of using the ATR
value we're using a percentage value and
so this is a little bit different
for our percentage trailing stop I'm
checking again are we in a long trade is
our position size positive greater than
zero if so then we do some quick math we
check this is what the math will look
like if I open up the settings menu here
by default we have a trail percent of
10. so this is 10 so to make this more
intuitive I made this a whole number
this is calculating our trailing
percentage multiplier for long trades
and the math looks like this I need to
open a parenthesis 100 minus 10 is our
default value divided by 100 gives us
0.9 and so in the case of trailing a
long trade from the closing price we
would set next Trail price to the
closing price multiplied by 0.9 that
would give us a 10 trailing stop from
the close now if we're in a short trade
this is exactly the same formula except
we're adding 100 to our Trail percent
instead of subtracting and that will
give us 110 divided by 100 equals 1.1
and the closing price multiplied by 1.1
would add 10 to the closing price now
I'm on a Forex market so 10 move in the
Forex markets means Armageddon has
happened you will never see a 10 move in
the major currencies at least in any
reasonable period of time so this is
more for stocks or crypto
pretty unlikely that you would ever use
a percentage trailing stop for Forex
which is why I included two options here
because I know there's all kinds of
traders that watch my channel and I
wanted to show you guys both methods and
so hopefully I've achieved that here we
haven't finished the script but we're
very close so this block of code is
doing exactly the same thing as this
except instead of subtracting the ATR
but multiplying price values by our
percentage multiplier and the final
default parameter here is doing the same
thing if we're in a long trade we
multiply the Swing Low by our percentage
multiplier otherwise we multiply the
swing high and that's it we now have our
trailing stop price the theoretical
temporary trailing stock price has now
been calculated all that's left to do is
check if uh either trailing price has
not been set to but still n a then we
want to immediately set it to this value
or this value whichever setting we've
selected otherwise if we already have a
trailing price saved then we need to
check if this new trailing price is
greater than in the case of a long trade
or less than in the case of a short
trade in order to override our saved
trailing stock so I'll paste some more
code in here and this is it this is the
final block of code but the final
complex block of code that we need to
evaluate so let's break it down it's
actually quite simple first we check if
our position size is not equal to zero
that means we are in a long trade or a
sure trade if it's zero we're flat if
it's one or higher then we're in a long
trade if it's a negative one or lower
we're in a short trade and if the bar
state is confirmed now you don't need
this check necessarily but I would
obviously recommend it in the case of a
trailing stop because until a candle
closes or a bar closes we don't know the
values yet we don't know this bar still
has 16 minutes to go there's a very good
chance that a new high or a new low will
be created before this bar closes and so
if we are updating our trailing stop
without taking into account whether or
not the bar has finished is confirmed
then we're going to be updating our
trailing stop based on a real-time bar
that's not ideal you really want it to
be based on the previous bar that's
confirmed and this check pretty much
does that bar state is confirmed is only
true on the last closing update of the
current bar so what that means is if
we're on a real-time bar like we are now
bar state DOT is confirmed will be false
on this bar but true on this bar
preceding it however when this gets to
its final tick its final update on the
very last nanosecond of this bars Time
bar state DOT is confirmed will be set
to true and so the moment this bar
closes this code gets executed and we
update our trailing stop you can
probably set this to is new as well that
would probably achieve the same thing
the problem is with is new is that if
there's a gap in price action that will
be factored into this code as well so
I'd recommend just leaving it as is
confirmed you could also do is confirmed
history is last confirmed history that
will be true on the last bar that closed
um that's almost the same thing almost
except that it doesn't take into account
this Buzz high and low on that final
tick so anyway that's a long way of
saying I recommend using bar state that
is confirmed when dealing with things
like updating a trailing stop or
anything that requires a bar to be
finished you don't want to be
calculating certain things on real-time
bars this is how you stop that now let's
finish up this lesson let's wrap it up
by breaking down how we update our Trail
stop these two lines of code are
identical or these two blocks of code
are identical except ones for long ones
for short and so here we check is our
next Trail price greater than our saved
trailing price or is our saved trailing
Price N A so it hasn't been set yet and
is our position size greater than zero
meaning we're on a long trade if all
these conditions are met that means
we're moving our stop loss up and so we
override Trail price with our next Trail
price the temporary Trail price we
calculated then finally just a little
bonus feature we add an alert to our
script so that we know that if we're
managing our position manually we need
to go and update our trailing stock and
so this alert will inform us that our
training stop has been updated for the
current symbol and it will also include
the price the trailing price formatted
to five decimal places and this will
only occur once per bar close and then
here we do the same thing but we're
obviously checking the opposite
direction and whether or not we're in a
short trade and that's it that's uh I
know it's not super simple you could
obviously significantly simplify the
script if you only wanted to use one of
these methods if you only wanted to use
a trailing stop method you don't need
these switch statements if you only
wanted to use swing highs and lows then
you don't need to check the closing
price and opening price so you could
significantly simplify this script
depending on your trading preferences
but if you're making a script and you
want to test various different options
then this is a really good template to
work with you can copy most of this code
into any strategy script and it should
work with almost any script a few
settings here you won't need you won't
need bar time and that's about the only
one you won't need all of these you will
probably need but if you're going to
copy this into an existing strategy
script you would copy all of these
inputs to the top of your script and
then all of this code below where we
enter all of this code up into where we
exit you would copy into your strategy
script and then finally you would make
sure that your stop parameter in your
strategy.exit function is set to Trail
price so this will update our trailing
stock price in the backtest engine
and make sure you also specify your from
entry to be the same ID
as your entry ID if you have multiple
entry IDs you'll need to copy this line
of code multiple times and update those
IDs accordingly and probably these ones
as well anyway last thing to do let's
draw our trailing stop onto the chart
let's save our code make sure I haven't
made any mistakes and misled you guys
everything appears to be fine let's
remove the script from the chart and
then add it back on and we can select
any bar let's select this one here and
change it to Short change the trailing
source to closing prices I'll leave it
as ATR for the moment let's change our
ATR period to 7 and I look back to five
bars and our ETR multiplier to two click
apply and there we go I have made a
mistake
our trade is not exiting I know why it's
because I did a typo here I left that
one in there and uh training view does
not know which trade to exit so let me
get rid of that one that was a very
underwhelming finale save my code and
the parameters should remain there we go
so the parameters stayed the same
now you can see the stop loss is pretty
tight to price action remember we set
the trailing stop the closing price so
even though it looks like it would have
been hit here it actually wasn't updated
until this closing price here so it was
this bar here that our stop came down
and then when this bar closed our stop
came down to two atrs above the close if
I set this back to lows and highs then
we have a more traditional trailing stop
above above swing highs let's jump over
to
Apple why not go to the daily chart it's
a little Annoying we need to remove our
script and add it back on in order to
get this to pop up again I wish training
view would add an option to just really
quickly select this but anyway let's do
a long trade from down here so long I
will set the trail price to opened and
we'll set the trail method to percent
and I don't know what the ATR is on
Apple
let's set the trailing price to five
percent
I need to re-add it
um so open long percent five percent
these parameters are ignored when we're
using a trailing uh trailing stop of a
percentage type so we can ignore these
settings click apply and there we go
that was a little bit tight because
we're operating from opens so when this
red bar here closed and was confirmed a
new trailing stop was calculated from
its open
of five percent
and I got hit here hey it's Matt from
the future editing Matt I forgot to
mention for you traders who like to exit
when a market closes below your trailing
stop this is particularly popular in
stock trading strategies it's really
simple to implement that adjustment to
the script however you need to use a
different strategy exit function so let
me show you what I mean so down the
bottom here we have our strategy.exit
that passes in our trailing stop as a
stop limit order if we comment this out
if you wanted to exit if the market
closes below our Trail price we can just
simply say if close less than Trail
price then use the strategy Dot close
function and this function also requires
an ID to exit so our trade ID is just
trade so now I've saved my script
minimize this
see that our stop loss was hit here but
it didn't exit the trade because we
didn't close below the stop loss we
closed up here however if I reduce my
trail percent to one percent now the
script exits as soon as this bar closes
below our stop loss on the next bar is
open we exit our trade
now obviously this is only going to work
for long trades so if you wanted to make
this work for both we would just simply
say uh it's probably better to put it
here we can say if strategy dot position
size greater than zero and the closes
below our trailing price we want to exit
or
you can copy this flip out operator
for short trades
and flipper operator for our training
stop save my code and this will also
work for short trades now as well so if
I remove the script add it to my chart
and let's say we entered short here
short percent let's go three percent
apply there we go now you can see we're
exiting when we get a bar close above
our trailing stop anyway thought I
better mention that to make this video
comprehensive let's go back to the past
recording map so that's it for today's
lesson I hope you found this interesting
as always the source code will be below
so you can go and play around with this
and modify it to your heart's content I
hope you found the lesson interesting if
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it is when YouTube is done talking like
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love you guys best of luck with your
trading and I'll speak with you soon
goodbye