Why Choose You Add Trailing Stop Orders in Your Crypto Trading Strategy?

Determining the specific risk management tool is the most effective part of a winning trading strategy. Before committing to a trade one should have a precise idea of where they will exit the trade. Exiting the trade at the appropriate time is among the most difficult dilemmas that traders face every day. However, there is an instrument that traders could use to limit their risks and maximize their gains. Get more info?

Yes, it is Trailing Stop! This dynamic option combines trading automation and risk management. This sophisticated type of order keeps track of your position when markets shift in your favor. It helps to minimize the risk of losing money. Stop orders are among the most effective tools for trading in crypto. They allow you to sell when the trend is finished and purchase at the time that the downtrend starts.

Trailing Stop order

Stop orders permit traders to place an order in advance to a set amount or percentage of the market’s fluctuation in price. This order type helps traders safeguard their gains and minimize losses if the value of any trade isn’t in the trader’s favorable direction.

This article will begin with a basic explanation of the Stop Order: Trailing Stop Order:

The type of this order includes the option of a stop (order trigger) that traces the market at a predefined/specified distance i.e. the trailing distance when price changes in the selected direction. However, it is not removed when the price is moving in a different direction. The limit or order of market is placed when the price of the market is at or above the stop price.

It can be used to either buy or sell. Let’s take a look at each one.

Trailing Buy

The Trailing buy order is a follow-up to the market movements as it decreases. The Trailing Buy Order will be activated when the market price rises over the trailing distance set.

Trailing Sale

The order monitors the price of the market as it increases. It triggers a buy-order when the price of the market falls by the amount that is specified as the trailing distance. Stop orders are a way to move into and out of existing positions, no matter how long or short.

Let’s take a look at these types of orders and what Trailing Stop orders function?

Trailing Stop Sell

The trader is able to create a sell order above the entry for a long-term trade. The trailing price moves upwards by a percentage trailing. If the asset’s price moves upwards an additional stop will be put in place. If it falls then the trailing stop are moving. Now, a sell order is placed when the price rises more than the callback rate of the high price and eventually reaches at the price. In this case, the trade will be concluded with a buy order at market prices.

We’ll now proceed to the Trailing Stop Buy Order.

Trailing Stop Buy

A Trailing Buy Order is an order placed for a short trade below the entry point of trade. The type of order is able to move the stop price downwards by a percentage. A new stop price will be established in the event that the price drops. If, however, prices rise the stop will cease to move and buy orders are issued when the price increases more than the callback rate of its lowest price, and it gets to the stop price. Remember that Trailing Buy Orders can be used in short positions and sell order is a viable option in long positions.

How does the trailing stop order work?

A trailing stop order is positioned at a specific distance away from the entry price. It only starts to trail if an asset rises in your direction. When the price increases, it drags trailing stop. The trailing stop is at the level that it was brought up until the time when the price stops growing.

Let’s look at a stock with the following information in order to better be able to comprehend its operation:

Purchase for just $10

Last price at the time of setting the trailing stop = $10.05

The total amount of the trailing period is 20

Immediate effective stop loss value = $9.85

If the price of an asset moves to $10.98, your trailing stop will rise to $10.78. If the price drops to $10.90 the stop value remains at $10.78. If the price continues to fall until it gets to $10.77 it will prompt an immediate market order. This means that your order will be placed based on the current price of $10.77. If the bid price is $10.76 then the trade is closed. The net gain for the trader would be $0.76 per share.

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