For some time I was working to develop an Adaptive Trailing Stop.

Here are some facts from my studies..

If we have a random bet with TP=SL (1:1) the probability of win is a little less then 50%. (due to spread)

If we put a random bet with TP = 2SL (2:1) the probability of win is somewhere at 34%. This is above theoretical 33% and that 1% is how we make money... (in reality is less then 1%)

Having an educated bet will increase these probabilities but no more (that why is so hard to make money). But I will consider the random thing to explain my idea.

For a system with 2:1 if Ask= OpenOrder we have 66% to hit SL and 33% to hit TP. When ASK is half distance between OpenOrder and TP the odds reverse to 66% to hit the TP and 33%. At this point traders do 2 things, some move to Break even and some close 1/2 of the order to obtain a free trade. For this specific ratio it is obvious the Break Even move will change again the odds to 50% so will have 16% less chances to win then the closing 1/2. However for a 4:1 or more system moving to BE is the best strategy.

No matter which strategy is used I will consider this the BE point.

After the BE is hit if price will move in our favor people use a trailing SL. A trailing SL will move the SL with 1pips for every Pip of increase. After some probability and testing I find out the best SL value is somewhere around TP-OpenOrder/K where K is about 2 to 3. So our trade will have to wait a lot till it start to bank some pips. Being a greedy person I was looking to find a way to bank more pips while keeping the odds to have the TP hits.

My Idea was to bank 1 pips for every 10 pips increase for the first part of Price movement and increase this up to 1:1 when Price go more into our favor. When price is closing to TP I tried to bank even more then 1:1 lets say for each 10 pips move I tried to bank 15 pips while keeping SL far enough.

I started a linear equation for the first part and came up with:

MySL = MathMax(FixAmt, SLCoef*(OrderOpenPrice()-Ask)/Point)

Depending on tested strategy SLCoef came up to around 0.6 to 0.8 and FixAmt close to 5 -10Pips and grow between 10-20%. (for each 10 pips we bank 2-4) .

The equation for the second part didn't came up with any improvement. I'm not sure what I did wrong for second part but I suspect is the fact the probability of the trend reversal increase too much.

From what I can guess a quadratic equation would be way better but this overcome my math and time capability at this time.

I'm sure i didn't invent the wheel so maybe somebody has more info in this.