Trailing-stop is an order the main function of which is the automatic tracking
Trailing-stop is an order, the main function of which is the automatic tracking of an open position with a constant change of the stop-loss level depending on the price movement. Principle of operation The trader opens a position towards the development of the trend and sets the distance from the current price to the trailing stop in points. If the price starts to go up, the trailing stop automatically "pulls up" the stop-loss behind it, keeping the set distance.
If the price decreases, the stop-loss quote remains in place. Thus, a trader who uses a trailing stop has the opportunity to get the maximum profit when the price moves up, not limited to the value of Take Profit. In addition, trailing stop is a limiter of losses. For example, a trader opens a buy position at a price of 1.3400 and indicates the value of the trailing stop 50 points back, ie 1.3350. If the price starts to go up and reaches a value exceeding 1.3400, the trailing stop automatically follows it, maintaining the specified distance of 50 points from the current price. That is, if the price is at 1.3470, the trailing stop is "tightened" to 1.3420. If the price goes down, the trailing stop does not change its position. In the case of opening a position for sale, the trailing stop behaves exactly the opposite. The trader puts it up a number of points.
When the price falls, the trailing stop is also shifted according to the set value. If the price increases, the trailing stop will remain in place. Using trailing stop in Forex trading, the trader does not have to manually move the stop-loss order as the profit under the transaction increases. Trailing stop sets the stop-loss at the level required by the trader automatically. Trailing stop is mainly used by traders who trade in trends, but do not have the ability to constantly monitor price movements. Also, the use of a trailing stop is advisable for intraday trading, when you need a quick response to any price movement. It is important to remember that the trailing stop works only when the trading terminal is running. When the terminal is switched off, the stop-loss is fixed at the current position. Return to the list of articles