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    Thread: Stop Loss v/s Trailing Stop Loss: Which one is best?

    1. #1
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      Default Stop Loss v/s Trailing Stop Loss: Which one is best?

      Most of us heard that we need to use Stop Loss(SL) in our trades to stay away from Margin Call(MC) but i want to know that which is better SL or Trailing SL?
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      there's a different between stop loss and trailing stop :

      Trailing stop : we can use it when the market move good with us because it help us to keep our profits in safe because we can make it example for 50 pips and every 50 pips we make it can keep it in safe from the loss and it will move up for every 50 pip we do it to keep our profits so it is better than stop loss but only if the market moved with us in trend .

      and regarding stop loss : it always be better when we don't have trend in the market because it can stop our loses at small loses when the market move against us so every one have its advantages but we can't define the better because this depend on market movements .


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      Quote Originally Posted by bigearners View Post
      Most of us heard that we need to use Stop Loss(SL) in our trades to stay away from Margin Call(MC) but i want to know that which is better SL or Trailing SL?


      Since the act of loss is a permanent aspect of the Forex business that we do need for success, It has become paramount for a trader to work hard and learn a good analysis method that helps them to set stops for their trades when such a trade is in losses.

      The stop loss is like a static or stagnant tool for controlling losses, While the Trailing stop loss serves a trader by keeping a profiting trade open (With a certain limit) and then making as much profits as possible till they trade actually reach Take profits, Or cut trades with a trader still having some Pips as profits.

      Stop loss is for day traders and short term traders.
      Trailing stop loss is for Long term(Position) traders.


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      Trailing Stop will allow you to capture a whole wave or trend and benefit from it by increasing your profits exponentially while a Stop Loss is just what the name says, it will stop your losses at a certain level.

      Trailing stop main benefit is the ability to lock your positions when they arrive at BE (Breakeven) which is the level where your stop loss meets your entry price at which point You're protected and can not lose and if the market goes against you, you will just exit at 0.00$ loss. For instance, You enter a BUY @1.2000 and set your stop at @1.1950 and use a trailing stop of 50 pips. When the price moves up to @1.2050, your stop will be moved to your entry price which is @1.2000 granting you protection from possible reversal of prices. If you were to just use a stop loss without trailing then if price were to reverse, it would just hit your stop of 50 pips costing you money.

      Trailing stop isn't always the best choice especially for trading ranging markets and people who trade lower time frames. There's also the fact that some people would like to not use Trailing stops just to give prices room to breathe for maybe price will go up in their favor then down and up for a certain period before eventually hitting their targets, If these people where to use Trailing stops then they would exit prematurely before reaching their TP.
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      Stop Loss v/s Trailing Stop Loss: Which one is best?
      Using stop loss is better.

      At least when we talk about metatrader. The dynamic trailing stop that is available there follows price difference and not price. The reason it is no good is because it does not follow price. The trail becomes very bad because of it. I have run tests do determine if trailing is better then using a static stop loss and what i have found there is that the static stop loss performs better, meaning it produces a system with higher profit.

      Then there is the issue where the dynamic stop is dependent on the client. This means that if the client does not have access to the server then it does not adjust. The stop will still be there but it will not do anything until it again has internet. It does not look back at previous movements either. Compared to the static stop loss that is dependent on the server component = i can turn my computer off and it still works.

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      Quote Originally Posted by bigearners View Post
      Most of us heard that we need to use Stop Loss(SL) in our trades to stay away from Margin Call(MC) but i want to know that which is better SL or Trailing SL?
      Both tools will be more helpful to save our account from loss Stop loss means it will close the trade on loss while trailing stop will close our trade on profit, we can set it when our trade on profit and when market will goes up it will moves with the market and if market will comes back then it will auto closed our trade in profit. we need to learn these tools in demo practice account those are more helpful and counted in basic learning process. expert will always use these in their trading specially when we are not in front of the market these tools will more helpful and close on trade after touching the level.


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      I know that both of stop loss and trailing stop is a very helpful tools to save our capital but there is a little different between these stop loss and trailing stop strategic tools. Here I want to discuss about these tools:

      Trailing stop: When the market start to reach our target profit level then we should use it as it can save our minimum profit with closing the trade when the market return from our target level. Suppose one of our trade reach to our profit level with 100 pips then we can set the Trailing Stop 40 pips and if the market reverse from that level then the trade will close with 60. So, most of time we use it at profit level.


      Stop Loss: We use this tools to save our capital from big loss when we see that the market will never reach to our profit level and the trade can make huge lose. So, every traders should use this stop loss tool to save their capital and to survive in this market for a long time to make more money but not to ruin within a short time.


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      A stop loss order closes your trade when your trade reaches a certain amount that you set.. Stop losses are useful for profitable trading. You can place a trade and a stop loss and don't have to monitor your work. The computer will do the trading for you.
      The best way to set stop losses is to use support and resistance levels. If you want to be a successful trader and you are buying a currency pair, you should set the stop loss below the support area. If you are selling a pair, you should set your stop loss above the resistance area.


      A trailing stop is a stop loss order that moves as the market moves. It helps manage risks. Trailing stops can be set up automatically, through brokers, or manually. Trailing stops can be set as sell stops for a buy order and as buy stops for a sell order. The difference between a trailing stop and a regular stop is that a trailing stop moves as the price moves. For example, if the price moves ten cents, the trailing stop will also move ten cents. This would occur if you were in a long position and the price starts to move up. But if the price goes against you, the trailing stop doesn't move. Infact, the trailing stop will close if the price moves in an opposite direction.


      One cannot say whether a stop loss or a trailing stop is better. It depends on market conditions. A combination of stop loss and trailing stop will allow you to have the optimum trading strategy during ranging times in the market. I would place tighter stops and trailing stops during the consolidation phase. However, during trending markets (when the volatility is high) a loose stop loss is good enough. A trailing stop is not needed.


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      I guess to answer this question comprehensively we need to put it in mind for the readers to understand what stop loss is and then go ahead to define trailing stop loss

      Stop Loss is the process whereby a forex trader decides to activate a point where he wants to leave the market when his trade is running and the conditions are no longer favourable to him, this is done to ensure that his account does not go into a drawdown state or margin call.

      A trailing stop loss is used to monitor the profit that one has made in the forex market, meaning when your position is already in floating positive and you don't want to lose what has been made already due to a deep retracement, you could decide to use this function to adjust the stop loss automatically as price moves in your position by certain number of pips, many traders are not even aware that this is possible because they did not learn forex properly, while other people that know it are skeptical because there are many disadvantages for using this functionality.


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      Quote Originally Posted by bigearners View Post
      Most of us heard that we need to use Stop Loss(SL) in our trades to stay away from Margin Call(MC) but i want to know that which is better SL or Trailing SL?
      First of all, not using stop loss is not the only valid reason why people get margin call in the forex business, there are many other things that necessities this taking place.

      Stop loss is the point where someone decides that what has been depleted from his account as a result of the price going against his position is okay and he wishes to leave the market, this can be manually done by the forex trader or set in the charts to automatically trigger whenever price has reached that level, this depends on the individual style of trading and nothing else.

      Trailing stop loss is used to lock in the profits that has already entered your trading account which you don't want to give back to the market, it is used mostly by swing traders that leave their trades for a very long period of time with the mindset of maximizing profits from the trade they executed.


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