Trailing Stop-Loss After Target 1: Three Worked Examples

A trailing stop-loss sounds simple until you sit through one. Price hits target one, the stop moves up to entry, price comes back, you are out at zero, and then the market runs to target three without you. It is natural to decide the rule is wrong. Before you do, you need the arithmetic of all the endings, not only the one that hurt.

This post takes one illustrative Nifty buy signal 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 signal we will use

The prices are illustrative, at a plausible 2026 Nifty level. A buy signal confirms on the close of a 15-minute candle, and the alert reads like this:

BUY NIFTY @ 25184.00 | T1 25240.00 | T2 25310.00 | T3 25395.00 | SL 25110.00

First, the distances from entry:

The initial risk is 25184 minus 25110, which is 74 points. Note that T1 is closer than the stop. On its own, T1 does not pay for one full stop-out. That is why the trailing rule and the further targets matter.

The trailing rule

The rule in our software is fixed. When T1 is hit, the trailing stop-loss moves from 25110 to the entry, 25184. When T2 is hit, it moves again to T1, 25240. It never moves backwards. We describe how these levels appear on the chart on the Nifty signal software page.

The software plots the levels. Whether you book part of the position at T1 or T2, or hold everything for T3, is your decision. So each example below is worked two ways: holding the full position, and booking one-third at each target.

Example A: T1 hit, then back to entry

Nifty rises to 25240, so T1 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 T1 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. If price kept falling, the same trade would end at minus 74 points. The trail turned a possible 74-point loss into zero.

Example B: T1 and T2 hit, then reversal

Nifty rises through 25240 and 25310. The stop is now at T1, 25240. Price reverses and falls through 25240. You are stopped out there.

• Full position held: exit 25240 minus entry 25184 is 56 points locked in.
• Thirds: 56 at T1, 126 at T2, and the last third stopped at T1 for 56. Total is 238, divided by 3 is about 79.3 points.

Here partial booking did better than holding, because the trade touched T2 and the full-position holder gave 70 of those points back (25310 minus 25240).

Example C: straight to T3

Nifty runs through all three targets without touching the trailed stop.

• Full position held to T3: 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 you something on the trades that go all the way.

All three side by side

The fourth row is there for honesty. Stop-losses get hit, and when the stop goes before T1, 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, and only you know that.

Why trailing to entry feels bad

The painful version of example A goes like this. T1 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 price sits close to that area. The trail to entry is placed 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 already reached T1 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 T3.

• 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 at T2 and still end as a 74-point loss. Some traders accept that for the sake of the runners. Many find that watching a good trade turn into a full loss 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. Take the same signal on a daily chart for a swing trade. T1 is hit, the stop trails to 25184, and you carry the position overnight. Next morning Nifty opens at 25120 on global news.

Your stop at 25184 was never traded. You exit near 25120, which is 64 points below entry, on a trade whose stop was "at cost". The software reads price; it does not predict news, gaps or events. Intraday traders who square off before the close avoid this. Swing traders cannot, and should size for it.

This post is educational and is not investment advice; the full disclaimer applies to every example above.

Try it on your own chart

Take the next ten signals on one symbol and log all three endings as they happen: where the trail sat, where you would have exited holding everything, and where you would have exited in thirds. Ten rows will tell you more than this post can. The 2-day free trial puts the levels on your own chart with no card asked for.