Hello, might be a silly questions but i’ve never really thought of it before. Do Trailing stops act the same as stop loss if your deal goes south? Or is it only kick in when profitable?
Let’s say I buy a pair and set TS at 50 pips. If my trades goes south 50 pips, will trade be closed?
Thanks!
Hi Nick,
You’re correct. If you open a trade with a 50pip trailing stop then your stop is at 50pips from your entry price should your trade never enter profit.
Lets use the following example:
Trailing Stop = 50 pips
Profit/Loss of Live trade:
+10pips >> Stop Loss is now at -40pips
+20pips >> Stop Loss is now at -30pips
+30pips >> Stop Loss is now at -20pips
+40pips >> Stop Loss is now at -10pips
+50pips >> Stop Loss is now at 0pips (worse case you are at 0 risk now, hence breakeven)
+60pips >> Stop Loss is now at +10pips (worse case you profit by 10pips)
Take spread into account and adjust as applicable.
Some trailing stops do have an option where they only become active once you are in profit which is equal to or greater than the trailing stop loss chosen. So in the above example your 50pip trailing stop would kick in at +50pips profit (if achieved). Prior to this point a fixed Stop is chosen as a worse case.
I think this is the case for all MT4 brokers I have traded with.
The demo I used in 1999 had an option for trailing stop and it was active from the point of setting it. It would simply move with the trade keeping the gap I set unless the trade turned in which case it was still and the trade would close if it hit the trailing sl.
Looking again at running a demo and getting into this I am stunned how few platforms have the trailing stop active. I have spent 2 weeks trying to get 1 company to activate it.
Frustrating