Trailing stops

Hello

I have been looking through my notes for this week now that the market has died. One thing I noticed is the trailing stop function (im so new Im still shiny).

Now, in MT4, why are the trailing stops so large ? Is this common among all platforms or is it broker dependent ?

Also the minimum trailing stop varies from pair to pair. Why is this ?

Michael

Do you mean why some are 3 digits and look like hundreds? If so, then that’s because of the extra digit for the [B]pipettes[/B]. You should notice that on some pairs the price has 3 digits after the decimal, and some have 5.

Therefore you have to compensate for that by looking at the trailing stops selection as either xx.x (for 5 digit pairs) or x.x (for 3 digit pairs) pips instead.

If you see x.x in the trailing stops selection, you have to watch out for that…lol…or you may set your trailing stop for 3 pips when it looks like 30…for the 5 digit pairs you’d set it at 300 for 30 pips, otherwise 30 is again only 3 pips.

:slight_smile:

hi sweetpip

in my MT4 platform, it tells me that the minimum trailing stop is 15 “pips” for the EURUSD pair, but when I look back at the menu, it allows 20 “points”.

Now I see what you mean. My original question was based on the 15 pip rule, because it seemed to be a large number for a minimum. I was thinking maybe they had a reason for this, but when I read your reply, I looked back to double check, and there is an apparent discrepancy in the menu.

I will take some screen shots and post in a minute.

Michael

ok

the first picture, points.jpg, shows the menu for trailing stops, and all the figures appear to be in points. which would be fine.

but in the second picture, the menu selection indicates a minimum of 15 “pip” trailing stop, which seems a lot to me.

I had asked this question because I thought the 15 pip rule was true, but now Im not sure which is right, and I cant test it live (demo) because the market has died. Even if I could Im not sure I would know what Im looking for.

Michael

ps. do trailing stops only come into effect after the trade has broken even, and reached the minimum value for that trailing stop ?



Trailing stops only start trailing after you reach the profit you set it to trail by…so if you put 15 pips, then you’d need to be in profit by 15 pips and if profit goes to 16 pips, your stop will be reset to b/e or 1 pip past your entry and so on.

Yes I see what you mean by discrepancy where the first pic shows 20 in the selection list, which is 2 pips, and the 2nd pic states a 15 pip rule in their t/s dialog text box. I’d say the 15 pip rule is the correct one, and just a glitch in their selection list to have lesser ones.

ok, so if 15 pips is the rule, and that sounds right to you, why is this value the smallest trailing stop value ? Is to allow for noise ?

I set some trades in the USDCAD chart, to see if I could test this.

It turns out it is actually in points, not pips.

I set the trailing stop at the minimum, which was 40. When it hit +47 above the buy price, it triggered a stop loss to be created 7 points above the buy price.


if profit goes back 1 pip, will the TS go back 1 pip too or will it stay there?

It seems to work like this.
If you set a trailing stop for 2 pips, the stop loss will automatically be calculated as the price moves up (assuming this is a buy).
As the SL is continually changing to be 2 pips behind, if the price starts to return back down, it will meet the SL after 2 pips.
So if I buy at 1.0000, and the price goes to 1.0010, the SL will be recalculated to 1.0008.
when the price moves back down, and reaches 1.0008, it will be automatically closed.

It means you can set a trailing stop, and you dont have to watch the price. In this case you would have made 8 pips, but that depends totally on where the price goes.

I think this is correct, Im new too.

Michael

ohh i got you, so when the price goes back down, the Trailing stop doesn’t go back down to the original setting, but stays there as the new Stop Loss

You place a [B]BUY[/B] bet.

[B]PA[/B] is motoring [B]up[/B] the chart.

Your trailing stop is following the motoring PA up the chart by the distance of pips you set your trailing stop to.

If your trailing stop is set to amount x pips and PA [B]retraces DOWN[/B] your set amount of x pips you are stopped out.

You place a [B]SELL[/B] bet.

[B]PA[/B] is motoring [B]down[/B] the chart.

Your trailing stop is following the motoring PA [B]down[/B] the chart by the distance of pips you set your trailing stop to.

If your trailing stop is set to amount of x pips and PA [B]retraces UP[/B] your set amount of x pips you are stopped out.

Im pretty sure thats the case. Im fresh new as well :slight_smile:

Are you sure…? That’s the case…?

You might need to think about it otherwise it could cost ya a real bundle. Once you get your toes wet in the wild sea called FOREX.:smiley:

Yes you do need to be sure…the market doesn’t give you a second chance due to a silly mistake…like hitting sell when you mean buy etc…lol.

In MT4, If you set a trailing stop only, you do not have a stop in place until you are in profit by the number of pips you set with the trailing stop. You still need a hard stop to start with.

Other platforms may do it differently like FXCM’s platform sets the hard stop by the trailing stop, and then follows price whether you are in profit by that amount or not.

Trailing stops only follows price in one direction according to the order type. If price retraces, the trailing stop stays where it is.

:slight_smile:

Thanks Sweetpip for clearing that up.

I use MT4 and as you say, it doesnt put in the TS until it is in credit. I noticed that and wondered if it was possible to change this so that the trailing stop followed the price from the start, wether it was in credit or not.

Sweet Pip - so what you are saying is…in MT4…if I set initial S/L 50 pips, TS 25 pips and PA is motoring to +24 pips and retraces 74 pips I get stopped out @-50 pips…? No…?

yes…'fraid so…lol…bummer eh!

what platform do you use then sweetpip ?

I demoed on MT4, then my live account was with a broker that had FX Trading Station 2.0, but new rules came out and I had to find another broker, and I finally found one with MT4 …I’m so happy :smiley:

Thats the way it is at IBFX too. TS, doesn’t kick in till you hit 50 (or where ever it’s set). TS is only good for locking in profit, it’s no good for taking the danger out of a trade, until at least your TS is hit.

Which is why I like manually setting my SL to break even at certain point where I think it won’t reverse all the way on me, and then locking in profit as price approaches pivots and R1,R2,R3. (zdx pivots) I’ve found moving my sl postive, when I can watch the trade, ends up with more pips in the end.

P.S. putting on small trailing stops is a sure way to get your trade stopped out way early. Trailing stops are most useful on longer term trades. Say you were a swing trader gunning for a few hundred pips over the week on one pair that is trending, a 100 pip TS would be very useful.

IMO, the reason most brokers don’t have say 1 to 5 pip trailing stops is to discourage scalping using them. It’s hard to manually lock in 1-5 pips, price will often go a little postive at the start of a trade and reverse in blink. But, if very small trailing stops were allowed, a lot of people would just put on overleveraged trades and gun for 1-5 pips over and over. That and slippage.