I have not tried this yet, I dont use either, I use a fixed stop loss.
I understand the use of an upper limit to ‘lock in the pips’ but it seems a waste to have a set limit to profit and if the move continues after this I could see myself jumping in again and again and running the risk of entering the move close to the reversal.
It seems logically more sense to me instead to place a trade with a trailing stop loss, hence ‘locking in the pips’ without putting a premature cap on profit. Thus letting the move run until reversal indicators emerge.
Any thoughts on this idea? Or does anyone use this method? if so what size of a trailing stop loss do you use?
it puts forward the point that you can have a profit target and then when the profit target is reached a trailing stop can be placed to lock in at least the target profit. Sounds better than simply jumping out and then probably back in like a greedy kangaroo.
Yes trailing stop is a good idea to lock profit. However make sure to set the trailing stop some distance from the current price, otherwise you wont benefit from it too much in a trending market because short stop will kill the trade quickly when the end result (hypothetical) may be 100 or 200 pips in the direction of overall trend. Also, setting the stop-loss at some distance makes sure that you can truly benefit from it in a ranging market.
I was up 38 pips on Aud/Usd. I set a fixed trailing stop of 20 pips, thinking the worst that could happen was that I would end up 18 pips in profit. I left the trade overnight and found in the morning that the trade had closed and i was -20 pips. I went from +38 to -20, a 58 pip difference, even though fixed trailing stop was at 20.
Yep, i use fix trailing stop loss,
Wake up in the morning and either make my pips due to being stopped out or i up the fixed stop lost (into the profit) and keep on waiting to be stopped out. Sometimes it is annoying but seeing it move with you greatly while you sleep and then an hour or two before you wake up it comes back and you go from a possible +200 to +20 pips. Guess i don’t use trailing as i don’t understand it fully.
In saying that, Any profit is better then a loss, right?
Hello PGPips, I hope that you are enjoying a healthy cuppa!
Well, this is not bad at all, I really enjoyed the video… Learning never ends… I see that the video is no.46 of a series, with the following one also being about risk management (trade size).
Without knowing your account number, and the ticket number of the trade in question, I can only take an educated guess at what happened here based on my previous experience. You mentioned that you “set a fixed trailing stop of 20 pips”. It’s important to note that FXCM’s Trading Station offers two different kinds of trailing stops: dynamic and fixed.
Below I will explain how each type works.
[B]Dynamic Trailing Stop[/B]
Suppose I buy AUD/USD at 0.8947 and set my Stop initially set at 0.8900 with a Dynamic Trailing Stop. For every pip the trade moves in my favor, the dynamic trailing stop will adjust my Stop by 1 pip. For example, if the price of AUD/USD moves from 0.8947 to 0.8948, then my Stop would adjust from 0.8901. If the price moved 3 pips in my favor from 0.8947 to 0.8950, then my Stop would adjust 3 pips from 0.8900 to 0.8903. With a Dynamic Trailing Stop, since my initial Stop value was 47 pips below the market price, that means my Stop will never be more than 47 pips away from the market price, because the Dynamic Trailing Stop will adjust pip-for-pip as the trade moves in my favor.
[B]Fixed Trailing Stop[/B]
Suppose I buy AUD/USD at 0.8947 and set my Stop initially set at 0.8900 with a Fixed Trailing Stop set to 20 pips. Using a Fixed Trailing Stop means that my Stop would not adjust pip-for-pip as the trade moves in my favor. Instead, my stop would only adjust after the trade has moved a full 20 pips in my favor, at which time my Stop would adjust 20 pips. For example, if the price of AUD/USD moved 19 pips in my favor from 0.8947 to 0.8966, then my Stop would still be at 0.8900. However, if the price moved just one more pip in my favor to 0.8967, then my Stop would adjust 20 pips from 0.8900 to 0.8920. With a Fixed Trailing Stop, since my initial Stop value was 47 pips below the market price, that means my Stop could be up to 66 pips away from the market price, because the Fixed Trailing Stop will only adjust increments of 20 pips each time the trade moves 20 pips my favor.
For future reference, it seems like for what you were trying to accomplish with your trailing stop, you would be better off using a Dynamic Trailing Stop and setting your initial Stop value 20 pips away from your open price.
I hope my explanation above helps you understand why have a Fixed Trailing Stop of 20 pips could lead to a loss greater than you expected. It all depends on where your initial Stop was set relative to your open price and when was the last time the Fixed Trailing Stop adjusted your Stop level. If after reading my explanation, you would still like a formal review of your transaction, please use this form to file a trade inquiry. The Trade Services Team will then contact you as soon as possible after completing their investigation.
Perhaps you weren’t aware of this, but slippage at FXCM works both ways. If you have a limit or take profit order, and the price gaps in favor of your trade, then you will get filled at the more favorable price which is trading in the market. This is called positive slippage or price improvement. The stats below show that FXCM clients receive price improvements just as frequently as they receive negative slippage.
It’s just that price improvements are more likely to occur with limit orders, while negative slippage is more likely to occur with stop orders, because of the momentum in the market. The lesson is to use limit orders whenever possible to open and close orders.
But what if you’re placing market orders? FXCM clients can use the Market Range feature on our Trading Station platform when placing a market order. The Market Range order type allows you to control the amount of slippage your order can receive when it executes allowing for price certainty (see image below).
A Market Range of “X” pips assures that all or part of your order will be filled within a “X” pip range of the current market price (“X” pips above or “X” pips below) if liquidity is available.
[B]Market Range Example[/B]: Assume that you place a market order to sell EUR/USD at 1.3235 with a market range of five pips. When the order triggers for execution, one of the following three scenarios can occur:
SCENARIO 1:
The market has already moved below your 5-pip Market Range and is trading at 1.3219. The execution halts and the order is automatically canceled.
SCENARIO 2:
The market is trading within your 5-pip Market Range at 1.3233. Your order executes and is filled at 1.3233.
Our Market Range feature allows FXCM clients to enjoy all the benefits of positive slippage while controlling the amount of negative slippage they can experience. This is in contrast to other brokers that re-quote their clients intead of letting them benefit from positive slippage. At FXCM, traders get no re-quotes and receive the full benefit from any positive slippage that’s available in the market. It’s one of the reasons why traders have entrusted us with $1.264 billion in client funds.
I think using trailing stops can be good for longer term trades, since you’re often looking to exploit the trend for all it’s worth. On the other hand, for shorter term trades, it might be better to use specific profit targets. That’s because you might find that on short term trades trailing stops will more often than not be closed out for a smaller profit than you could have gotten with a limit order.
[QUOTE=“Jason Rogers;600479”] . It’s important to note that FXCM’s Trading Station offers two different kinds of trailing stops: dynamic and fixed. Below I will explain how each type works.[/QUOTE]
Jason,
The explanation was very helpful. I wanted dynamic …
[QUOTE=“Jason Rogers;600494”] Hi PGpips, I think using trailing stops can be good for longer term trades, since you’re often looking to exploit the trend for all it’s worth. On the other hand, for shorter term trades, it might be better to use specific profit targets. That’s because you might find that on short term trades trailing stops will more often than not be closed out for a smaller profit than you could have gotten with a limit order. Jason[/QUOTE]
Hi Jason
Thanks for that. I think, If I am watching the trade anyway for it to hit a profit target. I would be more inclined to watch for a reversal indicator. I just don’t see the point in capping a trade as long as I keep my eye on it. I would understand taking the profit if I thought I would have to leave the trade for an extended time, but in my experience a move always goes for longer than I anticipated. I don’t know about anyone else but I also have a tendency when I jump out of a trade too early to jump back in, usually too late.
Thanks for the topic guys and also the links which I will follow up on. … soo much to learn still. I did a demo 2000 and gained 75k on a 10 k margin using trailing stop loss and a bit of short term (scalping) trades. I was advised at the time that trades can open at a whole new price so not to leave them over night … where possible. Thanks for the explanation on dynamic or fixed TSL. I didn’t know they could be fixed. I agree it seems logical to trail the movement to a more profitable gain than to close out auto style and have to re-enter or not (if you’re not watching)
ATM however I can’t find a broker that has the trailing stop loss activated and meta4 help menu says if it is not working the broker has to activate it. In 2017 I opened several accounts and again now I have tried 2 companies … emailing, phoning and can’t seem to get satisfaction or understanding … I have asked both companies to look at activating it and get back to me … waiting … can anyone advise in Aus based company that has an activated TSL?
