How to set a trailing stop and what this order represents
Trailing stop allows you to get maximum profit from the current trend; it allows you to move the stop loss
following the price movement, and closes the position only if the trend reverses.
That is, if the price has moved 200 points in the desired direction, you will take all 200 minus the size of the trailing stop.
In fact, this is a trailing stop loss, which is used if you cannot constantly control the trade.
However, we should not forget that, unlike the latter, this order only works when the trader’s terminal is turned on, and if you turn off the terminal or computer, it will stop working.
The purpose of this tool is to close a profitable position with a profit and prevent a correction from completely destroying the positive financial result of the transaction.
How to set a trailing stop? - this order is placed in the trader’s terminal, after you have already opened a position and started trading. When working with this stop order, there are some nuances, which I will describe below.
How does a trailing stop work?
Trailing Stop - it works quite simply, you open an order in the desired direction, then set the trading stop itself a little larger than the correction size, so that it does not work ahead of time.
In some trading terminals, the minimum value of this order is 15 points.
After the price enters the break-even area and your profit is more than 15 points, a stop order is automatically placed on the chart.
You can understand the whole process more clearly using a real example.
You opened a long position on the EURUSD currency pair at a price of 1.2510, then set a trailing stop at 20 points.
The price rose by 40 points and amounted to 1.2550, our order was triggered and stood at 1.2535, recording 25 points of profit.
Then there are two options for the development of events.
The first option - the price has gone even further to the level of 1.2590 and our order is already at the level of 1.2575, the fixed profit is 65 points.
The second option is that the trend has made a reversal, in which case the position will be entered at a price of 1.2535, bringing us 25 points of profit.
This option works great with a fast trend and sharp price jumps in the direction of the main trend.
Setting Trailing Stop
Everything here is quite simple, just open an order, then right-click on the open position, you should see the same menu as in the picture, then select the size you need and you're done.
If you like this option for loss control, and Trailing Stop is really worth attention, but you cannot keep your computer on all the time, then it is better to rent a virtual server to operate the trading terminal. In this case, the trader’s terminal will work autonomously.
The placement process can be automated using special scripts:
- Trailing Master script - http://time-forex.com/skripty/trailing-master
- TrailinRobot - http://time-forex.com/skripty/trailin-robot
It should be noted that some scripts allow you to solve such a problem as removing trailing stops after turning off the trading platform, that is, there is no need to purchase a virtual server.
An alternative to a trailing stop may be to manually move the stop loss to the breakeven zone, but unlike the previous one, this solution requires constant monitoring of the open transaction.
In order not to have to keep your computer constantly on, but an open position may exist for more than one day, it is best to use a virtual server for work.
Its cost is no more than $10 per month, and some brokers even provide their clients with such servers as a bonus. After you install the trading platform on the server, the triggering of the trailing stop will no longer depend on whether your home computer is turned on or not.
Similar servers can also be used to launch trading robots.