A Trailing Stop is an automated mechanism to have the Stop Loss trail behind the current price of an order by a set number of points. This is one of the best tools for profit maximisation. Let us find out why:
When is Trailing Stop used?
A Trailing Stop is typically used when the price is changing strongly in the same direction or when it is impossible to watch the market continuously for some reason.
Note: This is currently only available on MT4 and MT5 desktop terminals.
How can Trailing Stop help me?
Let us assume you open a Buy order and set up your preferable Take Profit (TP) and Stop Loss (SL). Say the market is moving in your favor and you are making a profit, but are busy and cannot watch the market.
Due to a sudden turn of events, the price starts falling right before it hits TP and comes all the way down, thereby closing your order at the set SL. This is exactly where a Trailing Stop can come in handy.
A Trailing Stop makes the SL trail behind the current price at a distance that you set up. This ensures that if the market trend reverses, you are at least able to catch some of the profit you were making.
Note: You can set up a Trailing Stop even if you haven’t set up a Stop Loss.
When does it start/stop working?
To activate a Trailing Stop, the order needs to move in a profitable direction by the exact number of points set up. Only after this condition is met will this feature be activated.
If your computer shuts down, the feature gets automatically disabled because it is not saved on the server. To avoid this, you may use VPS.