SafeZone Stop

Overview

The SafeZone Stop represents Elder's innovative approach to the challenge of stop placement in trending markets. Unlike traditional stops based on Average True Range, SafeZone uses directional movement similar to Wilder's system but applies it uniquely. The indicator first determines trend direction using an exponential moving average, then calculates the average upside penetration (+DM) for downtrends and downside penetration (-DM) for uptrends. By placing stops at multiples of these directional movements away from recent highs or lows, SafeZone creates dynamic protection that respects the natural breathing room of trends.

What makes SafeZone particularly effective is its asymmetric approach to stop placement. In uptrends, stops are calculated as Yesterday's Low minus a multiple of the average downside movement, protecting against adverse moves while allowing normal pullbacks. In downtrends, stops are placed at Yesterday's High plus a multiple of average upside movement. This design ensures stops are tight enough to protect capital yet loose enough to avoid random market noise. Elder recommends a 63-day EMA for position traders and multipliers between 2.5 and 3.5, with wider stops providing more room for volatile instruments.

Interpretation & Trading Signals

Example Usage

Code examples will be available once the Rust implementation is complete.