Forex trailing stop is regarded as a modification of the stop-order, which is set during the trades at a specific amount or value away from the existing market price. If you prefer to enter in an extended volume, you have to place this trailing stop-loss beneath the existing market value. For a shorter trade, the traders in Singapore may modify the stop order over the existing price value.
Therefore, a trailing stop is developed to save profits by keeping a trade open for a longer time. Besides, it continues to make profits for the traders, and the order efficiently ends the deal when the price changes its direction by a certain amount. People should place trailing stops when they put their first trade. However, it can also be placed after buying the instrument.
Three Benefits of Trailing Stop
- This modification of stop-order will lock the profits or limit the losses when the price starts moving favorably.
- This stop order can be moved based on the movement of the graph. However, you can’t move back when there is any unfavorable situation.
- It has the option to be either the limit order or the market order. Being a new trader, always try to use the best Forex trading software while using the limit order. It will save you from heavy slippage in trade execution.
How Can You Realize This Stop Order?
This stop-order always follows a specific and single direction as it is designed in such a way. It will lock in your profits when the price moves your favor or limit the losses during the bearish movement. Professionals suggest that this modification is more useful than the stop-loss limit, which cannot be changed with the market. This is why the Forex experts recommend that beginners use trailing stop more to enhance the possibility of making more money. To use and apply it effectively, you need to acquire a firm knowledge, which, in turn, can be improved by using a demo account.
Let us show you an example to understand the use of this stop order clearly. Suppose you have set the trailing stop order at 10% in a long-term trade. After buying the currency, you will receive a sell trade once the price of that currency falls below 10% from the peak value. This order can be moved up when you will see a new peak value on the chart. However, remember that once an FX trader shifts the percentage or currency’s amount to a higher position, he cannot change it back.
Forex Trading with Trailing Stop-Orders
An investor can utilize this modification successfully when he can set the amount or percentage at such a level, which is neither strict nor wide. Newbies often fail to realize the consequence, and some of them place it too tight, while others set it wide. Normal and regular market movements can trigger the value when they set the value in a tight position. In contrast, setting the value/percentage too wide means that your setup will not be triggered so easily by the normal price’s movement. Setting up too wide means that you are nothing but increasing your risks of losing money.
To set the percentage at an ideal value, it is better to consult a professional because establishing an ideal value is very difficult. The movement of the currency exchange market is uncertain, and an investor must gain sufficient knowledge to realize the ideal place. However, newbies should keep in mind that the trailing stop order is effective than others, but it has both advantages and disadvantages, like other techniques.
During the volatile market condition, a trader may place this order at a broader place because there is a possibility to trigger the value in this condition. On the other hand, we will suggest you use a tight order during a stable movement.