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    Thread: What is Trailing Stop?

    1. #1
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      Default What is Trailing Stop?

      The trailing stop loss order is alike to a stop loss in that it converts a market order to sell when the price drops down to the level of the order. The difference is that a trailing stop loss order continuously and robotically has its level altered by the price movement, and you don't have to update the level by yourself or manually.

      When you established up a trailing stop loss order, you lay down how far below the price you need it to trail. Typically, this is entered as a total amount, although the idea still works if it is a percentage. The price level of the order will never be more than that distance away from the actual price, as it will be rationalized when the price moves.

      The 'magic' of the trailing stop is that it will only adjust if the price of the asset changes in a favorable direction. If the price continues to decrease it will knockout the trailing stop level, the order will be triggered and the position settled, locking in most of your return. You will only be down from the peak about as much as the trailing distance you established.


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      Trailing Stop is an order closing order in forex trading that is moving (not static). Unlike the ordinary Stop Order, Trailing Stop will move to follow the price movement with the distance of pip that we have set. Although it can maximize profits and prevent profits from turning into losses, trailing stops also have a risk of usage that needs to be considered carefully. The risk arises when the price is not moving in the trend. A simple example can be taken in the above scenario.

      Suppose the price has gone up to 1.3025, but then it goes down to touch the SL at 1.3001, obviously the temporary gain of 25 pips will be wasted and you will only enjoy a 1 pip profit. That is, you still can not get the maximum profit.

      In response, it should be understood that the main function of trailing stop is to secure, not maximize profit. Even if the SL is hit and you fail to get the expected profit, the trailing stop is actually running its function, because it already secures some profit and prevents your order from losing.


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      Trailing stop is a tool that help you move your previously set stop loss level. This tool will give you more opportunity to adjust your trading strategy. Whats more, you will be able to lock in previous profits you have made and that is something you want to use every time in your trading, otherwise your trade will turn to losing one again and its never going to end well.

      Crucial part for trailing stop loss is not to have to too tight. That means market will move lets say 50 pips up and stop loss move also 50 pips up. If there is a spike or sudden move against your trade, it will close to break even or even some small loss although you fully know this is just a spike and not a directional move.

      Keep in mind these things when you use trailing stop loss.


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      Simply put, The trailing stop is a special type of Forex trading stop loss tool that is utilized mostly by the long term Forex traders and also by Swing traders. It isnt adviseable that a Forex trader that utilizes day trading or a Scalper to use it to trade. The Trailing stop loss works in a nice interesting way, It follows a forex exchange traders open trades that are mainly in profits and retreats as well when prices retreat too. It helps or assists a forex exchange trader to make as much Pips as possible in a trade that they have opened and the trade is in positive Pips profits. A Forex trader should make sure that they do not use this Forex tool to trade except they have fully learned how it works.


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      The trailing stop is a stop loss order that is used to lock in profits are progressive levels as the market price moves further in your favour. There is the manual trailing stop and the auto trailing stop. The manual trailing stop is that done by the trade when he manually moves his stop to lock in profit at different determined price levels. You can decide that for every 40 pip move in your favour you move your stop loss upward manually by an extra 40 pips. The auto trailing stop comes on with the trading platform and you will need know how to set the incremental value. Again your trading platform must be up and running continuously, for the auto trail stop to continually be in effect. If possible, use a VPS.


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      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.


      An example of how a trailing stop works would be if a long trade is made $70. A trailing stop of ten cents would be placed at $69. 90. If the price moved to $70.10, then the trailing stop would move to $70. If the price further increased to $70.20, the trailing stop would increase to $70.10. If the price decreased to $70.15, the trailing stop would stay at $70.10. If the price continued decreasing the $70.10, the trailing stop would exit at $70.10. Trailing stops close when the price changes in a different direction.


      Trailing stops are usually placed at a distance of ten cents. It is a good idea to give a good distance. Trailing stops shouldn't be too short. Popular distances include 5 cents, 10 cents and 20 cents.


      Trailing stops are optional. Some traders never use trailing stops.


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      Thread closed as the contest has ended..


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      Default

      Best market condition to use a trailing stop?

      A trailing stop is a tool or functionality on the trading platform which can be used to protect or lock-in a substantial part of trading profits earned on a trade while the trade is still active. It can be very helpful for a trader especially during trending markets where retracements might suddenly become reversals. The typical scenario in the markets is such that when the market is trending, there will be a number of retracements, and one of those retracements will ultimately turn into a reversal. A trailing stop protects a trader's trading account from surprising moves that can ruin the account.

      In my experience, the best market condition in which to use a trailing stop is a trending market condition. In ranging markets, the price movement is choppy and there is not much room for the trailing stop to accommodate the excessive price variations/oscillations. For this reason, trailing stops are not very useful in ranging or choppy market conditions.


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      Well there is some best market to use trailing stop. We are actually can use trailing stop when the market move in ranging and trending. To gain more pips, we can use trailing stop at trending market. In this case, we need to determine where is the trending market and where is ranging market. What we can say is we shouldn't too be greedy to get more pips. We are just should have a daily/weekly/monthly target. If the target is achieved, then we need to stop from trading. Simple as that. We need to always care about the target that we need to achieve.


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      A trailing stop loss is the function that enables a forex trader to decide on how he wants to treat his profits as soon as the position he has opened has moved a certain amount of pip into his favour. This is not used by many because they don't see the need for it.

      For example, a Scalper will most likely not consider this functionality to be useful because he is someone that enters the market and exit for short profits, so the market conditions for this kind of forex trader does not permit him to activate trailing stop-loss, although he might have a knowledge of how it works.

      Some other people who are not necessarily Scalpers could feel they would be taken out abruptly by using this tool, so they won't be interested, the use is basically dependent on the individuals style of trading and his preference to handling his profits and losses.


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