What is a Trailing Stop Order

1
What is a Trailing Stop Order?
2

• A trailing stop order is an automated instruction
  set on a trade that can be used to both limit
  losses and maximise profits. When a trader sets a
  standard stop-loss order, they fix a price point
  which, if reached by the cryptocurrency, submits
  a market order to close out the trade. If the
  starting price of any currency when a long trade
  is opened is 10, a stop loss might be set at
  9.50. This means the maximum loss the trader can
  sustain is 5. If the price moves to 10.50 and
  the trader wants to protect their profit by
  closing the trade should the price direction turn
  against them, they might change the stop loss to
  10.10. This means if the price of the instrument
  being traded takes a downward turn, the trade
  will close at 10.10 and 1 profit.

3
Standard stop losses must be changed manually as
an instruments price movement develops over the
course of time the trade remains open. A trailing
stop order removes the need to manually adjust
the price point a trade will close at because a
stop order closes the trade at a particular price
point. Compared to a trailing stop order closes
the trade when it changes by a chosen percent in
the wrong direction. If an instruments price at
the beginning of a trade is 10, a trailing stop
order could be set at 5 below that starting
price. This would again be 9.50 at the beginning
of the trade but would automatically adjust or
trail if the instruments price subsequently
rose. If it moved to 11, the price 5 below that
would be 10.45 which becomes the price point the
trailing stop order would automatically adjust to
without having to be manually reset.
4
A trailing stop order could also be set to adjust
its percentage difference from the current price
as it moves. Once the instrument a long trade is
open on has already gained 2, the trailing stop
loss could be set to adjust to 1 down from the
current price. This means that once a 2 movement
in the right direction has been achieved, the
trader wants to lock in at least 1 profit, if
the price movement subsequently turns.
5
2 Types of Stop Orders
6
Both, trailing stop market and stop limit orders
are designed to allow an investor to specify a
limit on the maximum possible loss, without
setting a limit on the maximum possible gain.
Buy trailing stop orders are the mirror image
of sell trailing stop orders and are generally
used in falling markets.
7
When to Use a Trailing Stop Order? Trailing stop
orders are used to keep trades within the
downside to upside ratio set out in the traders
wider strategy. If a traders strategy is to
never risk more than 1 of overall capital in a
single trade, a trailing stop order will be
initially set at the level so that a price
movement in the wrong direction will not cost
more than 1 of trading capital. If the price
subsequently moves in the right direction for the
trader, a trailing stop order will re-adjust
ensuring minimum profit is always locked in. If a
traders analysis has highlighted resistance
levels on the way up, the trailing stop order
would likely be set to adjust to a closer level
to price at those points of resistance as the
probability of a reversal would be considered
heightened. If the price does then turn, the
trailing stop order will lock in profits before a
continuation of the reversal can erode them.
8
Bounty0x https//beta.bounty0x.io/hosts/Alluma  
Bounty Landing Page https//hubs.ly/H0d8gms0   Bl
og https//go.alluma.io/bounty   Medium
https//medium.com/alluma/EFB88Falluma-1-500-00
0-token-bounty-EFB88F-6b387343ea43   Telegram
https//web.telegram.org//im?p_at_allumaexchange