Trailing Stop Orders: Mastering Order Types


Any illustrations, scenarios, or specific securities referenced herein are strictly for illustrative purposes. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal. 6.7 The trailing stop order will only be triggered during regular trading hours. 6.4 After the trailing stop order is triggered, the system will place a market order. For clients’ convenience, the order details will be displayed in the original trailing stop order.

Certain rule structures with Trailing functionality are possible but should not be used unless you have a very specific strategy in mind. In this scenario, the Trailing Stop protects your profits. If your order is activated, but not yet triggered, the order status will be displayed as . Trailing Delta is the percentage of movement in the opposite direction you are willing to tolerate. The Trailing Delta ranges from 0.1% to 20.0% by placing the rate manually in the “Trailing Delta” field.

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If the researchers excluded the technology bubble the model worked even better. This was because it got back into the buy trailing stop market too quickly after the technology bubble crash. Cash would be moved back into the stock market once the 10% fall in the stock market was recovered (the 10% stop-loss was recovered). The paper looked at the application of a simple stop-loss strategy applied to an arbitrary portfolio strategy in the US over the 54 year period from January 1950 to December 2004. But before we get to HOW and WHAT stop loss you can use to increase your returns first the research studies. Your ability to open a DTTW trading office or join one of our trading offices is subject to the laws and regulations in force in your jurisdiction.

limit offset

For example, an investor buys a stock at $100 and sets a trailing stop loss order at $90. If the shares rise, the trailing stop loss will move upwards by the same amount, always setting itself $10 below the high price realized while the trade is on. So if the stock rises to $102, the trailing stop loss order rises to $92, and it keeps trailing the stock price as it rises. Your stop price remains at $61.80 and your limit price remains at $61.70, or $61.80 – the 0.10 limit offset.

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Your stop distance will continue to move up every BTC moves up. A Trailing Order automatically adjusts to market movements. It follows your position when the market is moving in your favor and will take profits if the market moves against you and trigger your Trailing Order. When trigger conditions are fulfilled, Spot Trailing Stop Order will be executed as a limit order, and Future Trailing Stop Order will be executed as a market order. Therefore, a limit price is required to place a Spot Trailing Stop Order. An exit point is the price at which a trader closes their long or short position to realize a profit or loss.

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This is used to set a Buy Order for a coin that is dropping in price. Say BTC is currently at $42,000 but on a downward trajectory. A Trailing Buy set at $100 would mean that if the price reaches $42,100 your rule would buy. However, if BTC’s price continues to go down, the Trailing Buy would remain $100 above the current price. If BTC were to drop to $39,000 and then go up to $39,100, the rule would trigger.

Investor Bulletin: Stop, Stop-Limit, and Trailing Stop Orders

A trailing stop-loss locks in the upside while also protecting you from the downside. A trailing stop loss is a type of order that enables the trader to set a maximum dollar amount or percentage drop from the high point of a running position. The order is designed to capture a higher exit price on a position every time the price ticks higher. If the price moves in your favor, the ‘trailing’ aspect pushes the stop order higher. Once the security price does fall by the maximum $ or % specified, the position gets stopped-out. There is no ideal optimal trailing delta and activation price.

A trailing stop order works like a stop order, which is triggered once the stop price is reached and executed as a market order. However, instead of remaining at a specific level, the stop price changes when the market price moves in a favorable direction. In this case, if the price falls to £9, the stock is automatically sold as the price has dropped 10%.

A trailing stop order has a variable stop price that can be set at a certain percentage or amount away from the current market price. It aims to protect gains as the order can continue to profit as long as the price is moving in a favorable direction. When the market price hits the stop price in the opposite direction, the system will automatically place a limit order at the limit price the user set to close the order.

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If Pretty Good Company’s stock price fell below 90 cents, your stop-loss order would be triggered, and that particular investment would be sold at the next available price. Like the 200-day moving average strategy, a stop-loss sell strategy takes the emotions out of trading by setting a predetermined sell point. But where the 200 DMA applies to the entire market, a stop-loss strategy is concerned with an individual investment. It helps you determine when to sell a specific stock, that is, when to “stop losses” on that investment.

What is a trailing stop loss?

A trailing stop loss is a trailing set on a market order. Trailing stop loss is used to minimize the loss in case of a price reversal in the other direction to the forecast. This tool is most often used when there is a strong trending price movement, and when it is not possible to monitor the chart constantly. Unlike a regular stop, a trailing stop allows traders to get at least part of the profit when the trade is automatically closed.

Market order may be subject to collaring if you’re using an earlier version of the app or your app experience hasn’t been changed yet.

However, if the share price rises, the stop-loss rises with it, remaining 10% below the market price. So, if the share price rises to £15, your trailing stop-loss also rises to £13.50. If the share price dropped to £13.50 at this point, your trailing stop-loss would be triggered and a profit of £3.50 would be realised.


The benefit of a stop-limit order is that the investor can control the price at which the order can be executed. When you get a signal to go short – place an order to sell short one tick below the Low on the signal day. Move the sell-stop up to one tick below the Low on the second day. Continue to raise the sell-stop on each subsequent day until there is a correction and you are stopped in. It gives me peace of mind that I know that the hopper will take profit at the moments the prices fall again.

However, same as a stop order, a trailing stop order may not be executed if the stop price is not reached. Besides, the filling price may deviate from expectations as the order is executed as a market order. When you get a signal to go long – place a buy order one tick above the High on the signal day. If price rallies, you will be stopped in on the next day. Move the buy order down to one tick above the High on the second day.

If the sell-stop was activated before the new High was made, then the stop-loss would have been placed above the High of Day 3 and the trade would have been stropped out on making the new High. From one place.Exchanges Connect the world’s top exchanges.Paper Trading Simulate your trading, and test your bots.All Features An overview of these features and more. The difficult part is to not let your emotion keep you from selling when a stop-loss level is reached. To find out we deducted the results of the traditional stop-loss strategy from the trailing stop-loss strategy.

Meanwhile, he placed a trailing stop order to cover his short position with a trail amount of $3. The initial stop price is $30 and it will only move down when the market price goes down. As shown below, the stop price goes down each time a new low is reached. When the market price drops to $25, the stop price is $28. When the stock price rises to $28 afterwards, the order is triggered and filled immediately as a market order. In a different scenario, investor B bought XYZ shares at $27.

  • A stop-loss order is an order typethat helps manage risk by specifying a point at which your trade should be closed if the price moves against you.
  • Losses can potentially exceed the initial required deposit.
  • Trailing stops can only trigger during the regular market session.
  • A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price.

The stock of a company is trading at $30 and you place a buy trade. A standard stop order is an order where you direct the broker to sell or buy an asset once the price is triggered. Once initiated, this type of order becomes a market order. 6.2 After the trailing stop order is triggered, the system will place a market order automatically as soon as the stop price is hit. However, there is no guarantee that the order will be filled. If the order is not filled during the Time-in-force, it will be canceled automatically by the system.


Surprisingly, all traditional stop-loss levels from 5% to 55% would have also given you better returns than the buy and hold (B-H) strategy. The table below shows the results of the use of a trailing stop-loss strategy. When a 10% loss was exceeded the portfolio was XLM sold and invested in long term US government bonds. See a high quality chart with every alert, captured at the moment the alert was triggered.

If the price never moves above $1,000 after you buy, your stop loss will stay at $900. If the price reaches $1,010, your stop loss will move up to $909, which is 10% below $1,010. If the stock moves up to $1250, your broker will execute an order to sell if the price falls to $1,125. To summarise, a trailing stop-loss is a free risk-management tool that can help to maximise your profits when trading, as well as reduce the risk of making a significant loss. As the trailing stop only moves when the market price moves in your favour, it’s an effective way to increase unrealised gains, however small. When it comes to placement, you have the flexibility to choose a price or a percentage distance from the market price, or you can specify an amount you’re willing to risk on the trade.

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Customers should consider the appropriateness of the information having regard to their personal circumstances before making any investment decisions. 6.6 Trailing stop orders are only accepted if they close open positions. If the order quantity is greater than the current position, LINK the order will not be executed.

If the asset price rises above its lowest price by the trail or more, it will trigger a buy market order. Then, the trader will buy the asset at the best available price. A $0.55 per contract fee applies for certain options trades.

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