A trailing stop is an important tool to trade in forex. This strategy is used to increase your profit lock while you sleep. It works by triggering a forex stop order when the price of a currency pair declines 2% within a week. In addition, it can be helpful to tighten the trailing stop to 1.50%. Tighter trailing stops can provide more room to run while you re not trading.
Using a trailing stop is similar to setting a Stop Loss, but isn t as complex. The trailing stop is automatically attached to an open position, instead of on the server. You set it by selecting a trailing stop from the context menu of your open position. In the "Terminal" window, click on "Trailing Stop", and enter the desired distance between your Stop Loss level and current price. You can only set one trailing stop per open position.
Trailing stops work well for long-term trading. These types of trades lock in profits over a longer period of time. Because they work with a slow trading system, they can be used to lock in profits over months and days. Trailing stops are not always an ideal choice for day traders, so it is important to choose the right amount of profit that you re comfortable with. It s best to use a maximum amount of 15% or 20% to cover your potential losses.
Once you ve decided on a trailing stop, you can use an indicator or two to follow the market trend. A 20-period moving average is a good indicator to follow if you re riding a short-term trend. If you re looking for a long-term trend, a 50-period MA or 6 ATR can help you find the right direction. If you re trading based on moving averages, you can use them to set your trailing stop for a longer-term trade.
When price moves in your favor, a trailing stop will automatically follow your trade and close if the price changes unfavorably. If you re long on EUR/USD, for example, your trailing stop would lock in your profits at the latest high and close the trade when the market moves downward. This is a crucial advantage of trailing stop trading, as it will prevent you from losing money on trades that aren t profitable.
If you re a conservative trader, setting a stop loss is the right decision. You want to set a stop loss level that protects your margin, but don t risk more than 2% of your total margin. With a trailing stop, your stop loss level will always follow the market price and won t be modified if your profitability doesn t meet your goals. In addition, you will have a backup plan if the market suddenly surges.
If you have a losing trade, you may want to adjust your trailing stop to protect your profit. In such a case, you can adjust your stop loss in the future to protect yourself from any losses. If you have a winning trade, you ll likely want to adjust your trailing stop to a higher rate, but if you re not, it s best to hold off and wait for more favorable conditions.