How to make a TRAILING STOP in Pine Script

hey traders in today's video I'm going
to show you guys an example of how to
code a trailing stop in pinescript for
the trading view
[Music]
platform none of the material in this
video is financial advice I'm
experienced in managing my own finances
but I'm not qualified to give anyone
advice on what to buy or cell everything
I do in these videos is purely to
demonstrate coding techniques and the
code I write is purely for example
purposes you should always do your own
research and due diligence before
engaging in trading or investing and
please seek professional guidance if you
need it with that said let's look at
some code so a trailing stop is
typically used to lock in profits on
Trend following systems and systems that
look to ride momentum in markets it's a
very common exit method in many
strategies out there and today I'm going
to show you a simple template for
creating an ATR based trailing stop so
the ATR or average true range is a
method for analyzing price action
volatility the higher the ATR value the
larger the candles or movements in price
action over that time period and so the
advantage of an ATR based trailing stop
is that it will adapt to volatility so
as the market increases in volatility
your stop loss Will typically widen so
to start with I'm just going to create a
blank strategy script in the pine editor
this is purely an example script from
the trading view platform um it's not a
particularly good system definitely
don't trade it but it gives us a good
template to work with in terms of Entry
uh in terms of entering trades so that
we can play around with some code so
before we start I'm just going to tidy
this up a little bit there we go we have
the sample script from Trading views
sample Library added so the first thing
I'm going to need here is some user
inputs so let's copy over some code so
I'm going to get a bar look back an ATR
length and an ATR mul multiplier and
I'll explain what all of these do as we
get on with the scripts the first thing
I need is the ATR value so let's copy
this code over here this line of code is
getting the ATR value from the inbuilt
ATR or technical analysis library and
that gives us this red line here this
value that is what I'm going to use to
Trail my stop loss based on volatility
so the next thing I need to do before we
move on is calculate a long trailing
stop so this is a long trade I need to
get an initial trailing stop value for
that long trade and then same for short
trades I need to get an initial uh
trailing stop short and then what we can
do is compare that value to the
currently saved stop loss and Ratchet
that down in the case of a short trade
or ratchet it up in the case of a long
trade so I'll copy over some more code
here so here we are calculating our stop
loss values trailing stop loss has this
V keyword in front of it and that makes
it persistent across all the bars on my
chart so this essentially saves my
trailing stop value now it will be
initialized as na or not a number it's
not a value it's null and then we have
two float values here so let's look at
the long stop value to start with what
this line of code is doing is first
we're getting the highest low over our
look back period so that'll be 10 bars
by default so we're counting back 10
bars and getting the highest low over
that period so in this case that would
be the value here and then we are
subtracting the ATR value which is our
red number multiplied by our ATR
multiplier input so if I save my code
here this should compile without any
problems there we go we're not doing
anything yet I'm not actually using this
uh this trailing stop but if I come up
to the settings here if I set this to
two now I will be trailing my stop loss
two times this value from the highest
low over our look back period and
obviously for short trades it's going to
be the opposite we're trailing from the
highest high over my look back period so
now one of the best practices for me in
my own coding process is to have a
Boolean value here that checks if I can
take trades and what this is going to do
is validate any indicator values so
because we're getting a 14 period ATR
value if I go to the very first bar on
my chart I need at least 14 bars to
print before this value will give me a
number if we hover over these early bars
there is no number there so if I take a
trade in these early bars then I will
not have a stop- loss because if I do
any mathematical calculation with any of
these values that are na then the value
itself will be set to na so multiplying
an NA value by our multiplier so 2 * na
equals Na and if you open a trade or
pass in a stoploss value into the
strategy uh functions that means you
don't have a stop loss which is
obviously not good and So to avoid
issues on certain markets where the
script takes a trade very early on I
like to check my indicator values using
this little Boolean value here now
depending on the script I'm working with
I might have a lot of indicator values
to check in this case we only really
need to check the ATR value so here I'm
checking is our long stop and our short
stop not na I could simplify this by
just checking the ATR value itself in
this particular script so I'll leave it
as that to keep things simple and I've
also got this background color function
here which will highlight the chart when
this condition is true so if we do not
have a valid ATR value if I save my
script here the chart will turn red so
this period of time here we should not
be taking any trades because uh we don't
have the indicator values required in
order to manage the position all right
so now we can get on to the actual
trailing stop code the first thing I'm
going to do is change this um template
code here for for entering trades and
just add on our can take trades check so
in this particular example script we're
just looking for a moving average
crossover but if I add in can trades and
moving average
crossover now the script will not take
any trades unless our indicator values
are valid so that solves one potential
problem um it's a bit of an edge case
but it can happen it's happened to me in
the past and I couldn't figure out why
my script wasn't taking any trades and
then I realized it's because it wouldn't
close a trade that it took very early on
in price action but anyway let's move on
so here we're entering long trades and
here I am entering short trades now this
particular script the way it works is it
shorts and then it closes that short the
next time it gets a buy and then the
next time it gets say another signal it
opens a new short trade and and then it
closes that short trade and that's how
this system works because I'm going to
adapt it to us a trailing stop I don't
want it to do that anymore so I'm going
to add another check here n strategy.
position size equals 0 if I copy this
and paste it in the short condition as
well I could also add this on to the end
of this line here but then this line of
code is getting quite long so I'll leave
it inside this if statement and what
this is doing is now checking um do we
we have a moving average crossover and
my indicator values are valid and my
position is flat so I'm not long I'm not
short I don't have any open trades if
that condition is met then I will open a
long trade or a short trade I'm also
going to change
my trade IDs to make these easier to
reference later so this is our long
trade this is our short
trade if I save the code now the script
will open a trade and never close it
because I haven't put in my trailing
stop code yet that is what I'm going to
do next now there are many ways I could
go about this but for this particular
video I'm going to demonstrate the most
efficient way to do this with the fewest
lines of code possible while still
keeping the code readable and not being
too convoluted so what I'm going to do
here is I'm going to check the first
thing I'm going to check is is my
position size greater than zero that
means I have an open long trade so now
I'm updating the long trailing stop so
now now I need to check is my trailing
stoploss value this value up here na if
it is na then we have not taken any
trades and we need to set an initial
value for this stop loss value so if my
initial trailing stoploss value is not
set or my temporary long stop value up
here that is constantly calculating the
long stop value if that is greater than
our saved trailing stop value
then I want to override my saved stop
trailing value with the new long stop
and what I'll do is I'll plot these two
lines onto the chart so that you can see
what this is doing visually so let's
start by just plotting my long stop save
my code you can see this blue line is
constantly moving now for a trailing
stop I don't want it to do this I want
it to only move up I don't want it to
ever move down so every time it moves up
it should stay there so this should stay
up here if I'm involved in a long trade
so if I comment out my short conditions
here and I plot my trailing stop
loss I will title this stop loss and I
will give it a color of red a line width
of one and a style of plot. plot style
I'll just write style I'm looking for
line break line br so this will break
the line so I'll show you what I mean if
I save my code now we will no longer
take short trades so I'll just look for
the first long trade there it is you can
see my blue line here is constantly
moving 1 ATR from the lowest low but as
soon as this script enters a trade the
red line is tracking that blue line but
as soon as the Blue Line starts to move
down the red line stays where it is and
that's my trailing stop and it should
exit my trade up here but I haven't
added my exit code yet but now hopefully
you can see visually what this code is
doing so now I'm going to uncomment my
short code and we'll add in an else if
statement here so now what I'm going to
say is if I'm in a long trade do this
otherwise if I'm in a short
trade so my position size is negative
and not zero that means I am short if
that's the case then I can copy this
code here to update my short stop and
now I just need to flip these operators
around um
so is my saved trailing stop my red line
na not set or is my short stop lower
than my saved stop my trailing stop loss
if that is the case then we update the
trailing stop loss to Short Stop This is
why we need to set trailing stop loss to
V to make it persistent otherwise it's
going to jump around the same as the
values here uh this is my long stop
which is constantly updating on every
bar I do not want that to happen with my
trailing stop I only want my trailing
stop to change if it is moving higher in
the case of a long trade so that's it
the final thing I'm going to do is one
last else if this else is true then that
means I'm not in a long trade and I'm
not in a short trade so I'm not in any
trade and in that case I want to reset
my trailing stop loss to na now I'll
leave these plots here for now so that
we can see what's going on but the final
thing I need to do is exit my trades
with the trailing stop so I'll just copy
this code over to save time and explain
what's happening so I'm using the
strategy. exit function to exit my long
trade um so the format of this is this
is the name of my exit which will
display on the chart it's like a
comment and in the strategy tester
listed trades this second value is the
trade I want to close so here I'm
closing the long any open long trade
here I'm closing any open short trade
and I'm passing in a stoploss value
which is a price parameter and this
price parameter is my trailing stop loss
this red line so now when I save my code
the script will exit my long trade right
there there we go so if I zoom in a
bit um you can see that our stop loss
was hit on this bar here and our
stoploss stops drawing we have a line
break that is why I made uh this plot a
line break if I get rid of the break and
save my code this line will now
join um which is just an aesthetic thing
it just looks weird to me I don't like
that because you have this line jumping
all over the chart especially in cases
like this we don't take a trade for a
while by adding lion break we get rid of
that janky drawing and now the line
stops drawing as soon as it's set to
na so now I can get rid of my
longstop plot I'll comment this as draw
stoploss save my code and we are done
with this particular example script so
now let's just make sure it's doing what
I think it should be doing we're
entering short trailing stop loss kicks
in and then we do not exit the trade
until that stop- loss is hit so perfect
example of an ATR based trailing stop
there obviously a lot of different ways
you can do this you could Trail the stop
loss from a closing price you could uh
Trail the stop loss on a percentage
basis for the uh stock market or I could
flip this to be the lowest low and the
highest high over our look back period
which probably makes more sense for um
most trading systems now we're trailing
1 ATR above the highest high and locking
in profits as it moves down this is a
bit more forgiving than the lowest high
gives some more breathing room for the
trade so better for Trend F systems um
but for momentum systems I find that
having a tighter stop loss to capture
short-term momentum works a lot better
for me in my systems but yeah you get
the idea there are all different kinds
of trailing stops we could instead of
having a limit order we could wait until
price closes above the stop loss that's
pretty easy to code all I would need to
do is comment out my limit order code
and then I could just check if strategy.
position size is greater than zero that
means I'm long and then I can say and
the close is greater than trailing stop
loss then I want to strategy do close
and then I need to pass in my ID if I
copy that
code and uh paste that down here and
flip this operator flip this
operator change this to short now we
will only exit short trades if we
close above or below the uh stop loss
and that didn't work work because I've
got these operators around the wrong way
excuse me save that there we go that's
better so now you can see the script is
waiting for a bar to close above the
stop loss and then exiting on the next
bars open so those are a few different
methods for trailing stops I'll comment
this out and uh uncomment this for now
and I'll leave this code in here as an
example the source code to the script
will be below the video in the pin
comment as always if you'd like to learn
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hope you found this video interesting
best of luck with your trading take care
and I'll speak with you in the next
video goodbye
bye