Im not quite getting the concept of the trailing stop.
As its not in the school i was wandering if anyone could help clarify?
If i have a trailing stop of, lets say 10 pips, what does this mean?
Thanks
Sorry for my english.
If the price goes up, your trailing stop will go up, and will be in place: price-10pips.
If the price goes down, your trailing stop will go down.
Every pip moving in one direction will cause, that the trailing stop will follow the price action and move in the direction of the PA.
So, you can choose how far will be your trailing stop from PA.
Is this clear for you?
That’s not entirely right. If you have a 10 pip stop on a long trade, the stop will move upwards with your trade. But if it starts to go down, the stop remains the same. Vice versa for short trades.
Noooooo, if that is the case the SL will never get hit and it might as well be no trailing stop.
What mastergunner said is right. If you are long, and you have a TS of 10 pips, the stop will trail the price when going up but not when going down.
To put it simple, a a 10 pip TS can be read as, “Stop if price reverses by more than 10 pips from the most extreme point since the trade began”.
Ahh thanks guys. so it moves with the trade
For example my TS is 10 pips. this means if the price moves 10 pips in my favour my TS is now at break even? the price then move 5 pips in the opposite direction. as it moves in my favour again the new TS is 5 pips?
Is this right?
Hmm now that you mention it, I’m not sure what happens if it pulls back in your favour after retreating. I had the impression that it will not be a TS of 5 but once the distance becomes 10 again and if the price moves in your favour further, it’ll continue moving at 10 pips away.
I could be wrong though, I hardly ever use TS since I figured it does not work with my methods and prefer adjusting manually.
If price moves back to plus +10, then climbs higher, your stop resumes it’s position at +10 until price eventually backs up the full 10 pips to trip it…
Your impression was correct, the stop loss gives nothing back. It’s like a ratchet.
Example:
You go LONG on the EUR/USD. Say you bought it at 1.2090 and place a trailing stop of 15 pips … If price drops to 1.2085, the trailing stop hasn’t come into effect yet. If price makes it to 1.2105, your trailing stop becomes active and should price retreat 15 pips, you will break even. If price goes up to 1.2110, the trailing stop will move up to 1.2095 (5 pips above entry) and will lock it there. If price retreats, the trailing stop stays in place until hit.
one thing about the TS is that you want to make sure it is on the chart before leaving. If you set a 50 pip TS and walk away thinking that you are safe and the price goes in your favor 45 pips before retreating then the stop was never set and you are not safe. When I use the TS I wait until the red line shows on the chart at break even before even considing leaving the computer.
Yes, sorry, you are totally right(MedicalChew also). I forgot to mention what is the case if it is not going in your favour:o