Trailing stop is an order whose main function is to keep the position open automatically with a permanent shift in the stop loss level depending on price movements. Work principle The trader opens a bullish position and sets the current price distance of the currency from the trailing stop on the pips.
If the price moves upward, the trailing stop tail will then automatically stick with the set distance. If the price decreases, the trailing stop quote remains on the spot. In this way, traders who use trailing stops have the opportunity to get the maximum profit at prices that move up without taking the profit value set.
In addition, trailing stop is a limiting loss. For example, a trader opens a long position at the price of 1.3400 and again puts the trailing stop value at 50 pips, which is at 1.3350. If the price starts moving upwards and exceeds the 1.3400 mark, trailing stop following it automatically observes the range set at 50 pips from the current price. Which means, if the price hits 1370, the trailing stop turns to 1320. If prices decline, prices do not change their position. To open short positions, trailing stops behave otherwise. Traders put it a few pips higher. In decreasing price movements, trailing stops change according to the specified size.
With prices rising to the top, the trailing stop does not move. Applying trailing stops to Forex operations, traders must delete manual stop loss orders in line with the increase in operating profit. Trailing stop sets the stop loss level automatically at the value the trader needs. Trailing stops are mainly used by traders who run trading trends, but have no obligation to record price movements permanently. The use of trailing stops is also useful for intraday trading, when a quick reaction to price changes is needed. Keep in mind that trailing stops only work on active trading terminals. When the terminal is turned off, the stop loss is set at the current spot price.