Stop-loss, take-profit, trailing stop and cooldown
Caliente Signals · Updated
These four close a position regardless of what your exit rule is doing. All optional, all set per strategy.
- Stop-loss closes the position at a fixed percentage below your entry price. 0.1 to 50%.
- Take-profit closes it at a fixed percentage above. 0.1 to 500%.
- Trailing stop follows the high-water mark up and closes if price falls back from it by your percentage. 0.1 to 50%.
- Cooldown blocks new entries for a number of candles after any exit. 0 to 50, so 24 on 1h is a day.
The ranges are deliberately wide at one end and bounded at the other. Below 0.1% a stop fires on ordinary noise rather than on a move. A downside stop looser than 50% is barely a stop at all on crypto, and take-profit runs to 500% because a patient exit on a small-cap genuinely can target that.
The order they resolve in
One candle can reach more than one of your levels. Since the candle records the range but not the sequence inside it, the engine applies a fixed order and takes the less flattering reading:
- Stops. Stop-loss and trailing stop are both downside stops, so if you set both, the higher of the two levels is the one in force. It is the one that would have protected you first.
- Your exit rule.
- Take-profit.
The same order applies in the backtest and in live evaluation, so a strategy behaves the same way in both.
What the trailing stop follows
A trailing stop needs a high-water mark: the best price the position has reached so far. Ours tracks the highest closing price since entry, updated as each candle finishes.
Worth knowing because it is not the only possible choice. Tracking the highest price touched intra-candle would move the mark up sooner and hold a tighter stop. Tracking closes is the more conservative reading, and it is the one the live evaluator and the backtest can both reproduce exactly.
A stop level is an assumption, not a guarantee
In the backtest, a stop exits at exactly the level you set. Real markets do not always offer that price. When a market moves fast enough, it can jump from above your stop to well below it without trading in between, and your order fills at whatever price is actually available when it gets there.
The backtest cannot see inside a candle, so it cannot model that jump on its own. What it can do is charge your slippage assumption on the fill, which is exactly what that setting is for. It starts at zero, which is the optimistic case. If your strategy leans on tight stops in fast markets, raising it is how you find out whether the result survives.
A tight stop also converts small adverse moves into closed losses and pushes the trade count up, and every trade carries costs.
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Caliente Signals is an alert tool, not an investment advisor. Nothing on this page is financial advice, and past performance is not indicative of future results.