Trailing stops inside tick noise: how tight is too tight

[Amanhasnoname]

A trailing stop that follows price at a distance of 2 pips sounds disciplined. On a fast pair, it's mostly a random exit generator.

Tick-level noise can easily swing a pip or two within a second. A trail inside that noise gets hit by routine fluctuation, closing trades that would have gone on to hit the target.

Spread adds to the problem. A long position's stop triggers on the bid, and the bid can dip with a momentary widening.

Finding a sensible distance means looking at the typical adverse excursion of winning trades. If winners usually dip 3 pips before moving on, a 2 pip trail kills many of them.

Alternatives include trailing by a multiple of recent ATR, trailing only after price has moved a certain distance, or using structure, such as the last swing, as the reference.

Testing the trail on tick data, with realistic spreads, shows the real effect on total return.

How did you choose your trailing distance, and has it been tested?