Post of the Day: Trailing Stops

Power Course Instructor’s Response:

Yes. Trailing stops can be set to trail movement of a currency pair based on a predetermined amount. The advantage is that the stop can be advanced to lock in profit when the trader may not be in front of the computer. The disadvantage is that if the stop is set to trail too close to price action, the trader can be stopped out of the trade prematurely. A strong retracement or a price spike might close out the trade just prior to its making a move in favor of the trader.

As with anything new, it is wise to practice in a demo account with prior to trading in a live account with it.

Below is some additional information on trailing stops...

http://www.tradingstationsupport.com...railing-stops/

To utilize this feature, you must first place a stop the same way you did before from the market order window, entry order window, or by adding one to an already open position. You may then choose to trail it by checking off the Trailing Stop box. Next, enter the number of pips the pair needs to move in order for the system to move your stop.

Let’s go through an example:

You buy GBP/USD when the Sell price is 1.8300 and the Buy price is 1.8305, and you attach a stop at 1.8275; you then choose to trail it in increments of 50 pips.

When the close price (which in this case is the Sell price) rises by 50 pips to 1.8350, your stop order will then be trailed up 50 pips to 1.8325.

You can track your Trailing Stop in the Open Position window under the column “Until Tr. Stop Move”. The number shown there is how many pips the close price must move until the next incremental change in your stop order.

Since you chose to trail by 50 pips, each 50-pip move upward in the market price will cause the system to raise your stop 50 pips.

Trailing stops are a wonderful tool for mid to long-term traders. You may specify a Trailing Stop increment anywhere from 10 - 500 pips.