How can I use trailing stops to lock in profits and limit potential losses in trading?
1 Like
Have you read the School of Pipsology? I’m sure you can find the answer there. Don’t be lazy.
Like with all stops you need to make sure the SL is not so close to price that normal volatility does not hit the stop but a serious reversal does. Looks great in Youtube clips but isn’t easy in practice.
The second question you need to ask is for when you get more serious in trading. If you’re long in an uptrend, why do you want to get out when prices have already fallen? wouldn’t you really prefer to get out before price has fallen? This is almost never seen in Youtube clips because it rarely comes across looking like great trading: when price is in clear blue sky, there are no clues on the chart up there to hint when you should exit.
3 Likes
Before setting a trailing stop, determine the appropriate distance between the current market price and the stop-loss level. This distance should be based on your risk tolerance, market volatility, and trading strategy.
Once you have determined the appropriate distance, set a trailing stop order with your broker.
As the price of the asset moves in your favor, the trailing stop will automatically adjust to maintain the specified distance from the current market price. If the price continues to move in your favor, the trailing stop will continue to adjust.
If the price of the asset starts to move against you, the trailing stop will be triggered and your position will be closed out at the stop-loss level.
2 Likes