Strategy
Trailing Stop-Loss After Target 1: Three Worked Examples
One illustrative Nifty trade plan, three endings. We work out the points for each, with and without partial booking, and look at what trailing the stop costs you.
WizeBuySell DeskUpdated 7 min read
A trailing stop-loss sounds simple until you sit through one. Price hits your first target, you move the stop up to entry, price comes back, you are out at zero, and then the market runs to your final target without you. Before you decide the rule is wrong, you need the arithmetic of all the endings, not only the one that hurt.
This post takes one illustrative Nifty trade plan and works it through three endings, in points. No rupee figures and no quantities, because contract details change; check the current NSE circular for those.
The trade plan we will use
The prices are illustrative. Say you buy Nifty on the close of a 15-minute candle at 25184 and write down a stop-loss, a first target, a second target and a final target. This is a generic plan any trader could make for themselves, not a WizeBuySell signal.
| Level | Price | Distance from entry |
|---|---|---|
| Stop-loss | 25110 | 74 points below |
| First target | 25240 | 56 points above |
| Second target | 25310 | 126 points above |
| Final target | 25395 | 211 points above |
The initial risk is 74 points. The first target is closer than the stop, so on its own it does not pay for one full stop-out. That is why the trailing rule and the further targets matter.
The trailing rule
A common rule works in steps. When the first target is hit, the trailing stop-loss moves from 25110 to the entry, 25184. When the second target is hit, it moves again to the first target, 25240. It never moves backwards. How our Nifty strategies mark their own exits is on the Nifty signal software page.
Whether you book part of the position at each level, or hold everything for the final target, is a separate decision. So each example below is worked two ways: holding the full position, and booking one-third at each target.
Example A: first target hit, then back to entry
Nifty rises to 25240, so the first target is hit and the stop trails to 25184. Price then turns and falls through 25184. You are stopped out at entry.
- Full position held: exit 25184, entry 25184. Result is 0 points. A scratch trade.
- Thirds: one-third booked at the first target for 56 points, two-thirds stopped at entry for 0. Average is 56 divided by 3, about 18.7 points on the whole position.
Without the trail, the stop would still be at 25110, and if price kept falling the trade would end at minus 74 points.
Example B: two targets hit, then reversal
Nifty rises through 25240 and 25310, so the stop is now at 25240. Price reverses and stops you out there.
- Full position held: exit 25240 minus entry 25184 is 56 points locked in.
- Thirds: 56 at the first target, 126 at the second, and the last third stopped at 25240 for 56. Total is 238, divided by 3 is about 79.3 points.
Here partial booking did better than holding, because the trade touched the second target and the full-position holder gave 70 of those points back (25310 minus 25240).
Example C: straight to the final target
Nifty runs through every level without touching the trailed stop.
- Full position held to the final target: 25395 minus 25184 is 211 points.
- Thirds: 56 plus 126 plus 211 is 393, divided by 3 is 131 points.
This time holding did better, by 80 points. Partial booking always costs something on trades that go all the way.
All three side by side
| Ending | Final exit | Full position held | One-third at each level |
|---|---|---|---|
| A: first target, then back to entry | 25184 | 0 | +18.7 |
| B: two targets, then back to the first | 25240 | +56 | +79.3 |
| C: straight to the final target | 25395 | +211 | +131 |
| Stopped before the first target | 25110 | -74 | -74 |
The fourth row is there for honesty. When the stop goes before the first target, neither trailing nor partial booking helps; every approach loses the same 74 points.
Partial booking narrows the spread of results. It lifts endings A and B and lowers ending C. Which you prefer depends on how you handle a scratch trade after being in profit.
Why trailing to entry feels bad
The painful version of example A goes like this. The first target is hit. Price dips to 25180, takes out your stop at entry by a few points, then turns and runs to 25395. You made nothing on a trade that went 211 points your way.
It will happen, and more than once. Nifty often retests the breakout area before continuing, and the entry sits close to that area, exactly where a normal pullback can reach it.
The rule is not designed to catch every runner. It is designed so that a trade which has reached its first target cannot become a full loss. You pay for that protection with some missed runners. Judge the rule over many trades, not on the one that got away.
The alternative: never trailing
Suppose you leave the stop at 25110 for the whole trade and hold for the final target.
- In the painful case above, you stay in and collect 211 points instead of 0.
- In example A where price keeps falling, you take minus 74 instead of 0.
- In example B where the reversal continues down to the stop, you take minus 74 instead of plus 56. That is a swing of 130 points on one trade.
Never trailing means a trade can show 126 points of open profit and still end as a 74-point loss. Some traders accept that for the runners; many find it does more damage to their discipline than a scratch does. Whichever way you go, work out your risk-reward ratio on the rule you will actually follow.
Gaps through the trailed stop
A stop-loss is a price level, not a promise. Carry the same plan overnight as a swing trade. The first target is hit, the stop trails to 25184, and next morning Nifty opens at 25120 on global news.
Your stop at 25184 was never traded. You exit near 25120, 64 points below entry, on a trade whose stop was "at cost". Intraday traders who square off before the close avoid this. Swing traders cannot, and should size for it.
How our strategies handle exits
The stepped trail above is a general method, not a description of our indicators. Each WizeBuySell strategy has its own exit style. Nifty Options Buying and Bank Nifty Options Swing mark "Exit T1" on the chart. Futures & Options Buying in Shares books half and trails the rest. Shares Swing Trade books part at TP1 and TP2 and exits the rest on a trend exit. BTC Options Buying shows its trailing stop-loss live in the panel. You place and move every order yourself with your own broker.
This post is educational and is not investment advice; the full disclaimer applies to every example above.
Try it on your own chart
Take your next ten trades on one symbol and log where the trail sat, where you would have exited holding everything, and where you would have exited in thirds. To see how one of our strategies marks its exits on live candles, start the 7-day trial at ₹199.