Trailing stops. What is a trailing stop (forex)?

In the process of trading on the Forex market it is extremely important to use tools that help to regulate not only losses, but also profit. The most common tools are considered to be stop-loss and take-profit. Equally significant and useful assistants in the currency pair trading are Trailing stops. With the help of a universal program, any trader can easily squeeze out of the market the maximum amount of profit, remaining in it for as long as the situation allows and an open deal. So what is a trailing stop (forex)?

Getting acquainted with the trailing stop

The expression "trailing stops" is literally translated from English as a "moving stop". In other words, they are an order to the broker, in accordance with which the stop-loss will move behind the price of the currency instrument in the previously indicated direction. The main purpose of the tool is to facilitate manual trading of the trader and to allow the development of a strategy with minimal losses. Using trailing stops, it is possible to keep the profit that the market allows to receive.

Why trader trailing?

The main task of trailing is the implementation of a slow and planned follow-up of the stop-loss in the direction of price movement at a distance, which is indicated by the trader himself. A flexible stopper of losses and at the same time a profit fixer is designed to properly support open positions, in order to achieve a high level of professionalism in trade.

How does the trailing stop work?

Trailing, which is one of the modifications of the stop-loss, is already built into the trading platform. There is no need to look for an advisor on the Internet and install it on the terminal. Everything has already been thought out by the developers of the platform. To activate the tool it is sufficient to perform a number of manipulations on the terminal:

• Open a position or set a pending order ;
• Right click on the "line" of the order, a window will open;
• From the expanded window select the desired function;
• Assign a trawl a certain value in points.

As soon as the price of a currency pair goes plus at a distance equal to the parameters of the trailing, the instrument will transfer the stop to the level without losses. Movement of the floating limiter will continue until the moment the price turns around or rolls back over a distance exceeding the parameter specified in the paragraphs when setting up the instrument.

What are the standard parameters of the tool brokers offer?

Each broker has its own trading conditions and tools. If you consider specifically trailing stops, you can notice a significant difference in the settings. Most brokers offer a "gold standard". Most often, the minimum trailing parameter is 15 points. Depending on the manner of trade, you can set the indicator to 50 points, but no more. The settings offered by brokers are limited to a small range, in which the trailing stop will move.

How to expose a tool in the correct format, each individual currency pair suggests. The parameters of the instrument should be adapted to the volatility of currencies. For example, for the movement behind the price of exotic pairs, such as "Canadian", "Australian" and "New Zealander", only 25 points are enough. The euro and the dollar require at least 35 points in a measured movement and in the absence of economic news. As for the franc, then you need to set the parameter at the level of 50 points. If you do not compare the activity of currency pairs and the parameters of the instrument, it will not be of use. Most likely, the stop-order will be brought down by a jump in price, and then it will go to the priority side.

How does the market affect the effectiveness of trailing?

Every trader's trading tool requires in-depth study, including trailing stop. "Forex" is multifaceted, the movement of currency pairs on it is not natural. To make the tools profitable, you need to understand the subtleties of their application. Their effectiveness depends on how much the trader is oriented in the wave nature of the market. As the long-term practice of trading currency pairs has shown, each financial instrument has its own strength of movement.

• USD / EUR - the pair can move up to 60 points within an hour. This is a high volatility indicator, which dictates the installation of a trailing stop at a level of at least 35 points.
• USD / CHF is a good trail for a pair, at least 45 points.
• USD / CAD, NZD / USD - due to the calm movements of the pairs, the trail indicator is at least 30 points.
• AUD / USD - 25 points.
• GBR / USD - effective earnings are available if the trail is not lower than 45 points.

Trying to remove the maximum profit from the market, do not neglect the above indicators. The fixed number of points is the size of the rollback that each pair gives during the targeted movement. If in attempts to save a minimum trailing stop, it will be knocked out, and it will be possible to remove the cream from the foreign exchange market in an insignificant amount. The effectiveness of the tool depends only on the ability to use it.

When to activate the trawl?

In order for the tool to make a profit, you need to carefully study it. This also applies to the built-in functionality of a tool such as trailing stop. How to set the parameters correctly, we'll figure it out below. The result of trading will depend on the activation time of the instrument. It is not necessary to activate the profit regulator right away, except for situations when the news outlet influences the market. Each trader estimates the profit and loss for each transaction, and it happens that the active price movement indicates that the fall or growth of a certain pair will continue until a certain point outside the level. At the very profit limit is removed, and the game enters the trawl. Thus, he will fix the profit until the price turns around. Sitting at the computer monitor is not necessary. As the price of the currency pair changes, the "trawl bar" will be tightened, which will provide the trader with a good profit.

Trailing stop in the trade on the news

In the short-term trade on the news, the trailing stop can be an indispensable assistant. What it is, we considered earlier, and now we will figure out how to use it in this situation. Trade will be conducted on deferred mirror orders with pre-set stop-loss, but without take-profit. The rules of trading on news are a separate topic, they have a clear scheme, but the essence of using the trawl does not change. He takes the place of honor at the foot. In advance, it is impossible to predict how far the price will go and go. This can be 100, and 200, and 500 points. In the history of the market, recently the situation was that after a change in the interest rate, the pair CHF / USD jumped by 33 thousand points on 4 digits. This is a global movement that could bring a profit uncharacteristic for daily trading. The conclusion is quite obvious. A floating profit fixer in this particular case could help to increase several times the capital.

Unique Advisor Trailingator

The upgraded version of the built-in trawl in the trading platform is the trailing stop advisor. It is aimed at reducing the manual labor of each trader. The trawl is carried out in automatic mode. The main advantage of the Expert Advisor is that, in comparison with the built-in version, it activates itself. All that is required from the trader is to establish a clear distance in points, after passing through which the currency pair the instrument is independently activated. This is due to the fact that every professional speculator understands perfectly well that it is simply illogical to trawl a deal before passing at a price of less than 50 points. Rollbacks and jumps will knock down the order, not giving the chance to earn. Only a long practice allows you to understand what a trailing stop is. In itself, it is very unpredictable, and its study, as well as all available tools, is a long process, supplemented by persistent practice.

What are the disadvantages of using a trawl?

Tral, like the adviser for the trailing stop, has its drawbacks. Their quantity and quality will depend solely on which trading system is used by the trader and how flexible it is. It is worth noting that the trawl is very effective only with strong trading on the trend. When the market is in flat, use this tool is not worth it. Price movements during the period of stagnation are very unstable and short-term. Precisely to forecast them is very problematic. Without a purposeful movement, even at the best point of entry to the market, it is very difficult to take a minimum profit.

Agree, the exchange rate does not always move unidirectionally, so that the trailing stop order follows the price smoothly. There are cases of widescreen flat when the trawl is constantly knocked down, and the trader will not take profit even at the most good entry point. A floating stop can not be the basis of a trading system. It can serve as a universal supplement, which in certain situations should be used, while in others it should be avoided categorically.