Market movements are always moving erratically. Although from the analysis it will be detected how the movement of the ongoing trend is. However, later we also cannot know for sure whether the trend will continue or even stop. For that, there is a term trailing stop. This time we will discuss what Trailing Stop itself is.

Trailing Stop is the act of setting a stop loss level by following price movements. Usually this trailing stop is done after the trading position experiences a profit. For more details about this trailing stop, you can understand it through the article below. Before that, consult your trading through a trader assessment so that you know the limitations you have.

Trailing Stop Is

Trailing Stop is a command to close an order in forex trading activities that are moving (not static). Unlike the usual stop order, this trailing stop will move by following the price movement that has a distance of a predetermined pip. So it can also be interpreted that trailing stop is a modification of a stop order that can be set regarding its value based on a certain percentage of the asset price on the current market.

A trailing stop order is a specific type of stop-loss that automatically trails your position if the market rises, securing your profits, but will stay in place if the market falls – closing your position if the market moves against you.

A trailing stop order does not set the stop at a specific price, but rather at a specific distance from the current market price. It will be placed below the current market price if you are long on an asset, and above the current market price if you are short. The trailing stop is set at a specific percentage or number of points from the market price – this distance is known as the trailing step – and the stop will move to maintain that distance from the current price.

Although more people choose to use stop loss and take profit, this function is equally important in avoiding losses and securing positions. By setting a trailing stop, you can minimize losses and even increase profits.

The worst conditions in forex trading can be avoided by using this feature. For beginner traders, installing a trailing stop in forex trading is very rare. In fact, the role of this trailing stop is very important. Plus, in transactions, both sideways and strong trends. When the market moves normally or sideways, traders may be able to close transactions manually. However, if the market is moving quickly, it will be very difficult to end as desired.

By using this trailing stop, you don't need to worry when the price is almost touching take profit and suddenly reverses direction, then this trailing stop can lock in profits. This makes trailing stop a form of risk management, not only losses can be locked, but profits can also be locked by trailing stop.

Types of Trailing Stop

There are three types of trailing stops that are commonly used by traders themselves. The types of trailing stops are:

Dynamic Trailing Stop

This dynamic trailing stop is the simplest type. With a dynamic trailing stop, the stop point will be adjusted for 1 pip for every price that moves to the support point. So, for example, if EUR/USD moves up to 1.3101 from its initial price of 1.3100, the stop will be adjusted up to 1.3051.

Fixed Trailing Stop

You can also set the stop point according to your own wishes, so this fixed trailing stop will adjust gradually. For example, if you can set the stop point at every 10 pip movement. For example, a trader who buys EUR/USD at 1.3100 with an initial stop at 1.3050, after EUR/USD moves up to 1.3110, the trailing will increase 10 pips to 1.3060. After the movement continues to 1.3120, the trailing will increase again to 10 pips by adjusting to 1.3070.

Trailing Stop Manual

Jika kalian ingin sepenuhnya mengontrol stop loss tersebut, trailing sendiri dapat dipindahkan secara manual sesuai dengan keinginan. Terdapat keuntungan tersendiri ketika menggunakan trailing tipe ini, dimana harga tersebut dapat diidentifikasi sesuai dengan strategi milik kalian sendiri. Jika dirasa trend itu masih kuat sesuai dengan sinyal, maka kalian bisa menggeser stop loss ini sampai pada tingkatan tertentu sesuai dengan kemauan. Dapat dikatakan jika trailing tipe ini akan lebih fleksibel dan juga bisa dimanfaatkan pada segala kondisi. Sebelum lanjut pada cara memasang trailing stop, dapatkan income tambahan melalui program GIC affiliate dengan mengajak teman sebanyak mungkin.

If you want to fully control the stop loss, the trailing itself can be moved manually as desired. There are advantages to using this type of trailing, where the price can be identified according to your own strategy. If you feel the trend is still strong according to the signal, then you can shift this stop loss to a certain level according to your wishes. It can be said that this type of trailing will be more flexible and can also be used in all conditions. Before continuing on how to install a trailing stop, get additional income through the GIC affiliate program by inviting as many friends as possible.

How to Place a Trailing Stop

In MetaTrader, the trailing stop feature can only be activated when an order is running. To be able to install this forex trailing stop on MetaTrader 4, you must first open a position on your trading. After that, right-click on the order that is running, then select Trailing Stop. Then, you can choose from several distance options on the trailing stop that have been offered. If you do not find the appropriate option, then the forex trailing stop can be set manually. The method is to click on the "Custom" section then you type manually for the forex trailing stop you want. When placing this number manually, you should pay attention to the minimum rules that will be displayed, because this can be a parameter for you when setting the forex trailing stop itself. However, it should also be noted that you cannot set this trailing stop lower than the existing broker's minimum standard. These provisions can vary depending on each broker and the pair to be traded.

How to Use Trailing Stop

Trailing stop-loss placement is usually determined by setting a price at a desired distance from the market price, in line with how much capital you are willing to risk on the trade. The stop-loss will then remain at this distance from the market price while the price moves in your favor. The stop-loss moves in line with the price movement in your favor automatically. Some traders may choose to use a regular stop-loss in a similar way to a trailing stop, moving it manually themselves whenever they see the market price moving in their favor. Some traders may also decide to use technical indicators to guide their trailing stop placement. For example, they may use the average true range (ATR indicator) to understand how much the instrument they wish to trade moves over a given chart timeframe. This gives them an indication of how much price fluctuation they can expect during the trading day. However, any significant unexpected volatility, such as that caused by breaking news, will not be taken into account. After learning how to use a trailing stop, so that we can find out how satisfied users are with using our platform, be sure to fill out our internal survey GIC!

Best Time to Use Trailing Stop

This trailing stop loss moves along with the price movement that is moving in the direction of the existing trading trend. When the price moves against the trade, the trailing stop loss does not move. The result of this method is a stop loss level that is relative to a trader's highest profit, not based on the entry price. The dynamic adjustment of this stop loss level allows traders to capture or maintain the upside of the trade while guarding against the downside.

Thus, the trailing stop loss method is also known as profit protect stop. This trailing stop loss can be used without taking profit beforehand. The trailing stop loss method will work quite well in a very trending market because this trailing stop will continue to move with the market and will close the trade when the trend reverses. If you are going to buy (place a buy trade), then the trailing stop needs to be placed below the market price. If you are going short (sell), then your trailing stop-loss will be placed above the market price.
 
To exit the trade at the right price, rather than the next available market price, you need to set up a guaranteed stop-loss order. This is a useful way to avoid slippage. The best time to use this trailing stop is when the market conditions are trending and the direction is very strong, whether it is bullish or bearish. Or when important news is released that can make the market move very actively and also fluctuate.

This trailing stop is very useful for traders to be able to secure profitable trading positions without you worrying about prices that will reverse direction or experience a price change, because basically this trailing stop will be useful to be able to lock in the profits that have been obtained. Is a stop-loss order desired or recommended in every situation? No. It depends on your level of experience, your investment goals, and the market environment. However, a stop-loss order (trailing or otherwise) is appropriate in many cases, especially if the market looks uncertain (or you!).

Benefits of Using Trailing Stop

One of the advantages of a trailing stop loss order is that it automatically moves the stop loss level without requiring the trader to reset it themselves. Traders can use trailing stops to follow a trend that is in their favor, while exiting when a reversal occurs.

A stop loss order guarantees an exit from a position once the stop loss level is reached. Trailing stop loss orders can allow traders to take emotion out of their trading.

Apart from that, there are many advantages to using a trailing stop. Here are some of them:
  • If a major trend develops, most can be profitably exploited if the trailing stop-loss is not triggered throughout the trend. Allowing a trade to continue the trend until it hits the trailing stop-loss, in other words, can result in significant profits.
  • If the price moves up positively initially but then reverses, a trailing stop-loss is useful. A trailing stop-loss prevents a successful trade from becoming a loser, or at the very least, minimizes the amount of loss if the trade fails.
  • The trailing stop-loss order can be adjusted at any time. For example, you can enter any % trailing stop-loss for a personalized risk management plan and adjust it as needed.
  • Placing a trailing stop loss order is free of charge.
  • This order helps investors to remove emotions from their transactions and focus on pre-determined goals.

Disadvantages of Using Trailing Stop

There are drawbacks when using a trailing stop. These drawbacks are:
  1. Limited by the stock fraction policy so that the selling price of the shares you have is likely to be slightly off the targeted price. For example, if you buy shares at 2550 per share. This means that the shares are in the stock fraction category 10 and the TLS you set is 10%, then maybe your new shares will be sold at a price level of 2,290 or 2,300. In fact, the shares should have been sold at a price level of 2,295.

  2. Causes losses if used incorrectly. Usually investors will expect that if the price of the shares they hold drops sharply, then the share price will most likely continue to fall so that it is necessary to use TLS. In fact, it could be that the decline is only temporary and the share price will rise again. As a result, investors actually lose because they make the wrong decision. For example, A buys ABC shares when the company's shares are at 1000 per share. At the beginning of the purchase, A sets a maximum TLS of 10% so that if the price of ABC shares drops to 900 per share, the system will automatically sell A's shares. Indeed, ABC company shares fell to 875 per share for 5 days after A bought the shares. But the following week, ABC shares actually skyrocketed to 1,200 per share.
  1. Still related to weakness number 2, this causes TLS to only be suitable for use when the market is bullish or rising. In addition, this strategy is also less suitable for application to stocks released by cyclical companies, namely companies whose business models are highly influenced by trends, seasons and others. Therefore, even though it can be done automatically, TLS must still be followed by careful calculations.
Before continuing to the final discussion, for those of you who want to know your own trading talent, you can take the preliminary test from GIC.

Trailing Stop Function in Forex

Not every trading strategy is geared towards using profit points that are moving targets. For example, if you plan on scalping the market, you cannot risk wiping out the profit levels, and hoping the market continues to move in your favor. The same can be said for mean-reversion strategies with currency pairs or indices that are trading in a relatively tight range. Trailing stops are best used for trend-following strategies that use momentum to capture moves.

In general, trend-following strategies are geared towards catching big moves when the market starts to trend. One of the problems with trend-following strategies is that determining when a trend is in place usually requires a lagging signal, as the trend needs to start for you to realize that there is a trend.

One of the most commonly used trend-following strategies is the moving average crossover strategy. This strategy waits for a short-term moving average to cross above or below a long-term moving average. The USD/JPY chart shows 4 specific scenarios where the 20-day moving average crosses above or below the 50-day moving average. The problem with this type of strategy is that the signals are often too late, and if the trend is not there, you lose money. Since markets generally trend only about a third of the time, you must make more on winning trades than you lose on losing trades for this type of strategy to make financial sense. The key to a successful trend-following strategy is to follow the trend until it reverses. The best way to do this is to set a trailing stop. A trailing stop is a stop loss that continues to move with the market. As the trend persists and the market moves in your direction, you continue to move your stop with the market. So instead of setting up a trading strategy where you plan to make $2 for every $1 you risk, you set your initial stop loss, and then move it with the market as it changes. Many traders will wait for a reversal signal to help determine that the market has changed trend. Others will use a short-term moving average crossover to help them determine that the market has changed direction. Using a trailing stop loss with a trend-following strategy will keep you in the market when the market moves in your favor and allow you to reap the large profits that will offset the losses you incur when the security you are trading is short-traded.

Difference Between Stop Loss and Trailing Stop

A stop order, also called a stop-loss order, is an order to buy or sell a stock once the stock price reaches a certain price, known as the stop price. When the stop price is reached, the stop order becomes a market order. A buy stop order is entered at a stop price above the current market price. Investors commonly use buy stop orders in an attempt to limit losses or to protect profits on stocks they have sold.

A sell stop order is placed at a stop price below the current market price. Investors commonly use sell stop orders in an attempt to limit losses or to protect gains on stocks they own. A trailing stop order is a stop or stop limit order in which the stop price is not a specific price. Instead, the stop price is a specified percentage or dollar amount, above or below the current market price of the security (“the trailing stop price”). As the price of the security moves in a favorable direction, the trailing stop price adjusts or “traces” the market price of the security by the specified amount.

However, if the security price moves in an unfavorable direction, the trailing stop price remains, and the order will be triggered if the security price reaches the trailing stop price. After knowing what a trailing stop is, its types, how to use it, and the advantages of the trailing stop itself, you can also apply a trailing stop to your MetaTrader when trading. In addition, you can also find another technique using a trailing stop. This is the discussion from GICTrade regarding the explanation of "How to Use Trailing Stop When Investing".

You can also find out other information about trading, forex, and other financial trivia, such as "How to Use and Trading Strategy on Renko Chart" only in Jurnal GIC. Also make sure you deepen your forex knowledge at GICTrade, via scalping ebooks, and also NFP live trading via the Google Play Store application and the Apple App Store, to maximize your profits from forex trading.