How to earn more with a trailing stop loss
There are cases when an asset grows in price and you don’t know at what value to place your take profit.
For example:
- You decided to take a chance and take part in short-term pumps.
- You are trading with a new growing asset and don’t know the support and resistance levels yet.
- This is quite a common situation in the market, for example, with Bitcoin on October 25, when the rate jumped by 35%.
The solution is the trailing stop tool. If the price goes higher than you expected, this tool will allow your trade to close at a price close to the maximum.
What is a trailing stop?
The trailing stop is an order, the main purpose of which is to automatically track an open position with a constant permutation of the stop-loss level depending on the price movement.
How does a trailing stop work?
The trader opens a position in the direction of the upward trend and sets the distance from the current price to the trailing stop in points. If the price starts going up, the trailing stop gets automatically “pulled up” after it, while keeping the specified distance. If the price goes down, the trailing stop quote remains in place. Thus, a trader using a trailing stop has the opportunity to get the most profit when the price moves up, while not being limited by the set take-profit value. In addition, the trailing stop acts as a loss limiter.
Trailing stop loss example
Let's say you entered a trade at the level shown by the blue line, the asset then began to grow and it became possible to fix a small profit at the level shown by the red line. You believe that the asset may continue to grow and as it breaks even at this level, set a trailing stop of 2%. As a result, the deal will be completed automatically at the level shown by the green line. This is both profitable and convenient.
In order to use this case in Wunderbit Trading, all you have to do is enable and configure the trailing stop feature in the Trading Terminal / Bot setup menu section.
The slider sets the percentage offset from the current asset price. When the price of an asset goes up, the price at which the stop loss is triggered also moves up a step behind it. When the asset price goes down, however, the trailing stop does not move and upon the price reaching its level, it gets triggered.
Practice trading with trailing stop loss
On Wunderbit Trading, a trailing stop loss is available for FTX exchange.
