Hi paszkman,
From your post, I think what you're interested in is the way members decide how far to set a trailing stop from the current price - as opposed to how to set a trailing stop per se - as implied by the thread title? The latter is purely a function of the trading platform being used, which will vary from one broker/platform to the next whereas, the former is at the discretion of each trader.
A simple way of doing something similar to what you outline is to use the
Average True Range (ATR) technical indicator. The default setting will be 14 periods (i.e. 14 minutes, hours, days or weeks etc.) You can adjust this up or down to increase or lessen the impact of the most recent price volatility. Additionally, you can adjust the multiple that you set the trailing stop to. A common starting point would be 2 x ATR. So, if the average true range of the Dow daily price bar is, say, 100 points, then your trailing stop will be set at 200 points from the highest price (assuming you're long). If you want to increase the sensitivity, you could reduce it to 1 x ATR or, even, 0.5 x ATR. Needless to say, the lower you set the ATR multiple, the greater the probability of your stop being hit.
If your trading platform doesn't permit you to set a trailing stop and you want a visual overlay on to your charts so that you can adjust your stop manually, take a look look at
Keltner Channels. These show upper and lower limits for price movements based on ATR.
Tim.
