A trailing stop order (sometimes called a trailing stop limit order) is a type of stop-loss that automatically follows your position if it earns you profit. This can make them a useful addition to your risk management strategy – if your position moves favorably but then reverses, a trailing stop can lock in your profits before closing the trade.
Forex trading involves risk. Losses can exceed deposits
Trailing stop orders definition
Forex trading involves risk. Losses can exceed deposits
The benefits of using a trailing stop
The biggest benefit of a trailing stop is that you no longer have to manually move your stop if your position moves in your favor, and you want to adjust your exposure accordingly.
If you leave a traditional stop on an open position that you don't, then readjust if you trade is profitable, then your position will only automatically close if it retraces back to where you originally placed your stop. Any profits that you could have taken from the position, had you closed it earlier, would be lost.
Trailing stops help prevent this from happening, protecting the profits on a successful trade as well as minimizing losses.
How do I use a trailing stop?
On a long position, a trailing stop will be placed below the current market price of the asset being traded. On a short position it will be above the current market price. It is set at a percentage level or certain amount of pips away from the market price of the asset being traded, and as it moves it maintains that distance from the current price.
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