Understanding Target, Stop Loss, and Trailing Stop Loss (TSL) in Algomojo Strategy Creation

Introduction

In algorithmic trading, setting proper exit conditions is crucial for optimizing profits and minimizing risk. Algomojo offers three key trade exit mechanisms:

• Target (Profit Booking)
• Stop Loss (SL) (Fixed Risk Management)
• Trailing Stop Loss (TSL) (Dynamic Stop Adjustment)

This guide explains these concepts with both Points and Percentage (%) examples, ensuring you understand how to configure them correctly in Algomojo.

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1. Target Type and Target Value

A Target is the pre-set level where a trade is exited for a profit.

Target Type Options:

✅ Percentage (%) – Target is based on a percentage increase from the entry price.
✅ Points – Target is based on a fixed number of points above the entry price.

Example 1: Using Percentage (%)

• Target Type: %
• Target Value: 2%
• Entry Price: ₹100

🔹 Calculation:

• Target price = Entry Price + (Target Value % of Entry Price)
• Target price = ₹100 + (2% of ₹100) = ₹102
• If the stock price hits ₹102, the position is squared off for a 2% profit.

Example 2: Using Points

• Target Type: Points
• Target Value: 5 Points
• Entry Price: ₹100

🔹 Calculation:

• Target price = Entry Price + Target Value (Points)
• Target price = ₹100 + 5 = ₹105
• If the stock price reaches ₹105, the position is squared off for a 5-point profit.

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2. Stop Loss (SL) Type and SL Value

A Stop Loss ensures that a trade is exited if the price moves against you, preventing excessive losses.

SL Type Options:

✅ Percentage (%) – SL is based on a percentage decrease from the entry price.
✅ Points – SL is based on a fixed number of points below the entry price.

Example 1: Using Percentage (%)

• SL Type: %
• SL Value: 1%
• Entry Price: ₹100

🔹 Calculation:

• Stop-loss price = Entry Price – (SL Value % of Entry Price)
• Stop-loss price = ₹100 – (1% of ₹100) = ₹99
• If the stock price falls to ₹99, the position is exited with a 1% loss.

Example 2: Using Points

• SL Type: Points
• SL Value: 3 Points
• Entry Price: ₹100

🔹 Calculation:

• Stop-loss price = Entry Price – SL Value (Points)
• Stop-loss price = ₹100 – 3 = ₹97
• If the stock price drops to ₹97, the position is squared off with a 3-point loss.

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3. Trailing Stop Loss (TSL) – Dynamic Stop Adjustment

A Trailing Stop Loss (TSL) moves the stop-loss level dynamically when the trade moves in the favorable direction.

TSL Parameters in Algomojo

1. TSL Type: Percentage (%) or Points
2. Every Price Move (X): Defines how much the price must move before SL is adjusted.
3. TSL Value (Y): Defines how much the Stop Loss moves when the price moves by X points.
4. Initial SL: The fixed Stop Loss set before the TSL starts adjusting.

Example 1: Using Percentage (%)

• Entry Price: ₹100
• TSL Type: %
• Initial SL: 98 (2% below Entry Price)
• Every Price Move (X): 2%
• TSL Value (Y): 1%

🔹 Scenario:

1. At ₹100 (Entry Price)
   • Initial SL = ₹98
2. When price reaches ₹102 (+2%)
   • SL moves from ₹98 → ₹99
3. When price reaches ₹104 (+4%)
   • SL moves from ₹99 → ₹100
4. If the price falls back to ₹100, the Stop Loss is hit, and the trade exits automatically.

Example 2: Using Points

• Entry Price: ₹100
• TSL Type: Points
• Initial SL: 97 (3 points below Entry Price)
• Every Price Move (X): 2 Points
• TSL Value (Y): 1 Point

🔹 Scenario:

1. At ₹100 (Entry Price)
   • Initial SL = ₹97
2. When price reaches ₹102 (+2 Points)
   • SL moves from ₹97 → ₹98
3. When price reaches ₹104 (+4 Points)
   • SL moves from ₹98 → ₹99
4. When price reaches ₹106 (+6 Points)
   • SL moves from ₹99 → ₹100
5. If the price falls back to ₹100, the Stop Loss is hit, and the trade exits automatically.

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4. How Algomojo Executes Target, SL, and TSL Together

Algomojo evaluates all three exit conditions for every trade:

1. If the price reaches the Target, the trade is exited with a profit.
2. If the price hits the Stop Loss, the trade is exited to prevent further loss.
3. If Trailing Stop Loss is active, it adjusts dynamically and exits when hit.

🚀 This ensures profits are secured, losses are controlled, and trends are followed efficiently.

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5. Best Practices for Using Target, SL, and TSL

✅ Avoid Setting SL or TSL Too Close:

• If SL is too close, normal price fluctuations may trigger early exits.
  ✅ Use TSL for Trend-Following Trades:
• Allows profits to grow while protecting gains.
  ✅ Maintain a Proper Risk-Reward Ratio:
• Example: 1:2 Ratio (Risk ₹5 to gain ₹10).

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Conclusion

Algomojo’s Target, Stop Loss, and Trailing Stop Loss (TSL) settings provide traders full control over trade exits. By understanding and using these parameters effectively, you can minimize losses, maximize gains, and automate risk management efficiently.

💡 Test different settings in Algomojo to optimize your trading strategy!

📢 Have questions? Drop them in the comments below! 🚀