What is Trailing Stop ?

Trailing Stop

You need to ask a few questions before you can set or calculate a Trailing Stop: 
a) What kind of trader are you? Day Trader, Short or Long term? 
b) Are your stocks closed to your target price? 
c) Is the stock trending or sideways? 
d) Does the chart pattern show sign of reversal? 
I can only share my thought how I set my Trailing Stop for a Short Term Trader. For day trader and long term trader you may need different calculation. 
I know some use Fibo numbers which I am not too familiar but maybe it is helpful if you are long term trader and you are comfortable at 50% retracement but I am not. 
You are setting a Trailing Stop because you are on a winning stock. Like all of us you want to sell at the Top right? But let me tell you it does work that way, no one can sell a stock at the top all the time. You want to ride on your profits as long as you can and want to sell at the top, sorry this 2 things does not work hand in hand. You also do not want to sell too early and missed the big profits. 
1) For short Term Trrdaer--I normally set my Trailing Stop just below an important support, for example the breakout level (Resistance turns support), or support that has big volume on it. 
2) I will tighten my Trailing stop when the price is close to my Target price. That says I bought a stock at $1.00, my target is $1.20. When the stock say move to $1.18 which is 2 cents off my target, I may set it at says $1.15 if it fails to hit $1.20. ( In Mathematic that means to make that extra 2 cents I am willing to give back 3 cent gain). 
3) That says it hit $1.20 and break above, I would have taken partial profits and set my new Trailing Stop at $1.18 (2 bits below the breakout of $1.20 to protect my remaining profits.) 
4) When the chart shows weakness like form a Dark Cloud, Shooting Star etc., then I may set the Trailing 1-2 bits below that Bearish Candle. 
Lastly, this is my way of trading and many of you may not agree with my method. The most important for you to decide is how much you are willing to give back in exchange for a longer ride? That is your right Trailing Stop Level. 

This Article written by Matrixcool