Good afternoon fellow traders. My name is Charly. I hail from Nigeria. I’m a Newbie and I have successfully built a system that I’m demo trading at the moment. But, there is this thing I do not understand. I do not understand what trailing a stop in the direction of a winning trade entails. Does it mean I have to exit the current trade I’m in, that is, I’ll take profit and then re-enter that same trade by setting a new stop-loss in the direction of a winning trade? Please if you know the answer to this question, kindly help me out. Thank you.
Suppose you buy on eurusd at 1.2000, with a stop loss at 1.1900.
If the price goes down to 1.1900 or lower, your position is closed and you loose some money.
If the price goes up above 1.2000 the trade becomes a winning one potentially. Let’s suppose the price goes up to 1.2100. You may want to move your stop loss level up to place it in between 1.2000 an 1.2100, this way you will be sure the trade will be closed in profit, whatever the price will do later. This action of moving the stoploss level is called trailing the stop. It can be done manually, or maybe your trading software allows you to set up an automatic trailing method as the price moves.
Hope that helps.
Thank you very much. I have learnt quite a bit from this.
Thank you Orpexo. Yes it does help a lot. I appreciate.