fx-trailing stops - part 1 (theoretical)
DESCRIPTION
Part 1: Trailing Stops - Theoretical • Advantages of a Trailing Stop • Trailing Stop vs Traditional Stop Loss • An Example Agenda • Reduces the need for you to manually move your stop • Maintains its level when the market moves against you • Adjusts as the market moves in your favor • An advanced type of stop loss order When placing a Trailing Stop, you need to decide how you want to set the following two parameters: 1 – Distance to Market 2 – Trailing Step Distance to Market + Trailing StepTRANSCRIPT
Part 1: Trailing Stops - Theoretical
Agenda
• Advantages of a Trailing Stop• Trailing Stop vs Traditional Stop Loss• An Example
What is a Trailing Stop?
• An advanced type of stop loss order
• Adjusts as the market moves in your favor
• Maintains its level when the market moves against you
• Reduces the need for you to manually move your stop
When placing a Trailing Stop, you need to decide how you want to set the following two parameters:
1 – Distance to Market 2 – Trailing Step
Distance to Market and Trailing Step
Distance to Market
+Trailing
Step
When placing a Trailing Stop, you need to decide how you want to set the following two parameters:
1 – Distance to Market 2 – Trailing Step
Distance to Market and Trailing Step
Distance to Market
+Trailing
Step
Distance to Market + Trailing Step
Trailing Stop vs
Traditional Stop Loss
Trailing Stop Orders vs Traditional Stop Loss Orders• Traditional Stop Loss Order – static
Entry
Limit Order
Traditional Stop Loss
Trailing Stop Orders vs Traditional Stop Loss Orders• Traditional Stop Loss Order – static Limit Order
Traditional Stop Loss
• Trailing Stop Order – dynamically updates the stop price Limit Order
Trailing Stop LossEntry
Entry
An Example
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
40 pips
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
45 pips
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
50 pips
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
50 pips
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
With our trailing stop, we get stopped out at 1.2155 (10 pip profit)
Entry
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
With our trailing stop, we get stopped out at 1.2155 (10 pip profit)
A traditional non-trailing stop order would have been executed at 1.2115 (30 pip loss)
Summary
• Advantages of a Trailing Stop• Trailing Stop vs Traditional Stop Loss• An Example