Trailing Stops?

Beginner Questions
1

As you can tell I am fairly new to this game. For the most part, I know all the basics, but I need a little help with trailing stops.:confused: Any help would be great!

Example:

1.) I place a market buy.

2.) Then place a stop loss sell 10 pips below my buy with a 10 pip trailing stop.

How does the trailing stop move. Does it wait for the current price to move up 10 pips with it then jumping up 10 pips as well. Also, Does the trailing stop move only by increments of 10 pips or pip by pip?

2

Yes. When the price moves by the increment you choose, the stop moves up the same number of pips - not pip for pip. Some brokers may handle these stops differently. Be sure to check the “user guide” for the software your dealer is providing.

Which dealer do you use?

3

Thanks,

I use GFT demo account. So in this example the stop will only move in increments of 10 pips. If the price moves up 29 pips, my stop only would move up twice.

Is this correct?

4

yes you’re right…in your example the stop would have moved up twice.

I have a doubt though…if the stop overtakes the price where you bought & then if the market price drops down , will the trade close out at the new stop level & give you the profits? i.e. is there a reverse trailing at all?

just to explain this further consider my example:

I buy at 1.3250, and my stop is at 1.3240 and if i set the trailing stop rate at 10

  1. when the market moves up by 10 pips i.e at 1.3260, my SL will move up by 10 pips i.e. to 1.3250
  2. if the market moves up another 10 pips,it will be at 1.3270 & the SL will move up 10pips to 1.3260

Now if the market moves down and hits 1.3260, will my trade close out with a profit of 10 pips or will the SL move down by 10?

Are there any market conditions where trailing stops are not a great way to trade?

thanks guys !

5

Now if the market moves down and hits 1.3260, will my trade close out with a profit of 10 pips or will the SL move down by 10?

Yes, you will be stopped out when the pair trades at your stop. That doesn’t mean you will get the stop price. You may get filled a few pips off your stop price. Check with your broker about [U]spread widening[/U] and [U]fast market conditions[/U].

“Reverse trailing” would defeat the purpose of the trailing stop. If the market moves against your position, you want the stop to trigger and close your position.

Hope this helps.