Online brokers offer various types of orders designed to protect investors from significant losses. The most commonly used sequence is stop loss, but other types of orders should be considered trailing stops.
Stop Loss
One of the most common methods used to limit the amount of losses from falling prices is to place a stop loss order. Once the price falls to the stop loss level, the position will be closed at the current market price, which prevents further losses.
A trailing stop and a regular stop loss look similar because they both provide protection against their capital if the forex price starts to move against you, but that's where the resemblance ends.
Trailing stop offers a clear advantage because it is more flexible than fixed stop loss. This is an interesting alternative because it allows traders to continue protecting their capital if the price goes down. But once the price goes up, the trailing feature will start, allowing you to protect your profit while the price keeps moving up
While the regular stop loss has a fixed value and can be adjusted manually by the trader, trailing stop automatically overshadow the price movement, following the increasing stock price action. This type of trailing order freely allows traders to keep an eye on more than one open position.
Over a period of time, the trailing stop will adjust, moving from minimizing losses to protect profits as prices reach new highs.
One of the biggest features of trailing stop is that it allows you to determine the amount you will release without limiting the amount of profit you will take.
One of the best ways to maximize the benefits of trailing stop and stop loss is to incorporate it. Yes, you can use both, but it's important to note that at first the trailing stop should be deeper than your regular stop loss. It is also important for the trader to always calculate the maximum risk tolerance and then establish the appropriate primary stop loss.
An example of this concept is to have a stop loss set at 2% and a trailing stop at 2.5%. As the price increases, the trailing stop will surpass the fixed stop loss, making it redundant or obsolete. A further price increase would mean minimizing any further potential loss with any price above.
Using Trailing Stop on Trade On
Stop Loss
One of the most common methods used to limit the amount of losses from falling prices is to place a stop loss order. Once the price falls to the stop loss level, the position will be closed at the current market price, which prevents further losses.
Trailing stop offers a clear advantage because it is more flexible than fixed stop loss. This is an interesting alternative because it allows traders to continue protecting their capital if the price goes down. But once the price goes up, the trailing feature will start, allowing you to protect your profit while the price keeps moving up
While the regular stop loss has a fixed value and can be adjusted manually by the trader, trailing stop automatically overshadow the price movement, following the increasing stock price action. This type of trailing order freely allows traders to keep an eye on more than one open position.
Over a period of time, the trailing stop will adjust, moving from minimizing losses to protect profits as prices reach new highs.
One of the biggest features of trailing stop is that it allows you to determine the amount you will release without limiting the amount of profit you will take.
One of the best ways to maximize the benefits of trailing stop and stop loss is to incorporate it. Yes, you can use both, but it's important to note that at first the trailing stop should be deeper than your regular stop loss. It is also important for the trader to always calculate the maximum risk tolerance and then establish the appropriate primary stop loss.
An example of this concept is to have a stop loss set at 2% and a trailing stop at 2.5%. As the price increases, the trailing stop will surpass the fixed stop loss, making it redundant or obsolete. A further price increase would mean minimizing any further potential loss with any price above.
Using Trailing Stop on Trade On
It is a bit more difficult to use a trailing stop due to price fluctuations and the volatility of certain forex prices, especially in hours of active hours of the day. Of course, this fast moving price is what will make the most money in the shortest period of time.
The benefits of this strategy eliminate the emotion of your trading. It is important to set values when you are calm, focused and able to make decisions based on the information presented on the chart. Also, do not guess yourself. With the combination of trailing stop and stop loss order this will make your trading value to be much more leverage.
In metatrader, there are several options pips you can use in this trailing stop feature is at least 15 pips, so when the price has reached 15 pips trailing stop function will immediately work and automatically form a stop loss with a minimum of 15 pips or equal to the opening price Your first time.
WHEN THE BEST TIME USING STOP LOSS AND TRAILING STOP COMBINATION?
The best time to use a trailing stop is when the market conditions are trending and the direction is very strong, whether it is bullish or bearish. Or at the time of important news releases that make the market move very active and flutuatif.
While the price does not move in line with expectations, prices will go down and stop loss will stop it to avoid any further losses
Trailing stop is very useful for traders to secure the position of profit trading without you worrying the price will reverse or change the price, because basically the trailing stop is useful to lock in profits that have been obtained.
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