Understanding the Trailing Stop, Function, and Its Benefits In Forex Trading
Trailing Stop is a facility owned by traders to keep an eye on the price of their investments. With this facility, traders can perform programmed instructions such as reducing larger losses or others. This order will be realized when the price suddenly goes down and this is very useful when you invest in an investment with a high level of volatility.
This facility is also very useful when traders aim to make sales at a certain limit, but also can not conduct continuous monitoring on the market to see price fluctuations.
Simply put when you use trailing stop, it can help you to minimize the risk of loss and maintain profit to some extent. Trailing Stop is a facility to protect the profits you have successfully won.
When a trader utilizes this facility, traders are required to check regularly including shifting Stop Loss and Take Profit. Often happens where traders regret because it is in closing condition when the potential profit can be greater obtained.
When the above occurs, the trader’s emotions are being tested. As a professional trader, sorry for the decision that has been made shows that you are psychologically not ready to become a trader. With the facility trailing stop, as a trader, you can be more calm because it can reduce the sense of doubt to close the trading or not.
How to Use Trailing Stop
As a trader, setting up a trailing stop is actually not too difficult to do. The thing you need to do is right click on the current position. After that you can select Trailing Stop and start determining pips spacing.
Example like this, if you specify trailing stop at 20 points, then make order at 1.3000 value. Thus the trailing stop will amplify stop loss at 1.3001 price if the price has touched the number 1.3021. Furthermore, if the price rises at 1.3030 position, then Stop Loss will automatically be increased to 1.3010.
When the price of 1.3030 there is a decline in the number 1.3015, then the Stop Loss owned will remain in the position of 1.3010 and will not be a decline. Stop loss will automatically adjust to the profit that you get locked with the facility trailing stop.
Thus trailing stop facility allows you to be able to get the benefits optimally without worrying about the profit can turn into losses.
Advantages and Disadvantages of Trailing Stop Facilities
As a trader, you must understand well the advantages and disadvantages when using the trailing stop facility. The first advantage is that you have the potential to earn large amounts of profits when prices move in long durations with large amounts of pips.
On the other hand there are shortcomings that you need to consider when using this facility is the potential loss of profit that you have collected when the market changed direction and touch the trailing stop that has been used previously.
Rules Utilizing Trailing Stop In Forex
If seen from how it works, trailing stop is optimal you apply when the market is undergoing trending. But when you apply this tactic to the sideways price, then trailing stop will make stop loss more quickly exposed before you accumulate a large profit.
In addition, you should customize the trailing stop with the potential strengthening of the ongoing trend. If the price moves on a trend that tends to be weak, then you should not set a trailing stop distance that is too large.
In order to determine the strength of trens, then you can use the ADX or Average Directional Movement Index indicator. When the strengthening is in the range of 20-40, then it is a signal that shows when the price trend will continue to strengthen.
There are also forex traders who use the trailing stop to anticipate risks on trading techniques related to position management such as Averaging and Pyramiding.
Utilizing Trailing Stop On Various Techniques
Using Trailing Stop In Pyramiding Technique
Pyramiding is a strategy used to increase profits by opening new orders as the trend strengthens. Any order made using this technique will open with the same lot size.
Trailing Stop is a facility that is more than just a security, but can also be used as a locking profit and an important element in the technique of adding a trading position. Nevertheless, there are some things to note that the condition of the price before installing trailing stop forex, whether in trending conditions or sideways. You also have to identify well every movement force that occurs. In this way, you can utilize this facility optimally when trading takes place.
The thing you need to consider is not just forex that has a risk, but all types of investments that do have risks that need to be considered. With the higher the potential risks that you dare to face the greater the potential benefits gained.
With the trailing stop that we have delivered above, then you can minimize the risk that will occur and maximize the benefits to be gained.
That is the complete discussion we can convey in relation to the Trailing Stop and the various benefits that can be obtained in forex trading. If you still have further questions related to the above topics, please ask us through the comments field below. We’ll be happy to answer any incoming questions and help with any difficulties you’re facing.
If you do not mind and feel the information can help a lot of people, please share this post with more people through social media. Thus will more and more people who know what the trailing stop and benefits that can be obtained.
Hopefully the above information can provide a lot of inspiration for you all.