What is a Trailing Stop?
If you are already familiar with the Stop Loss order, this article will help you use it more efficiently and get more profit from your trading on the Forex market. We will look at the Trailing Stop trading terminal function and understand how it works through an example.
Trailing Stop is a function of the MT4 trading terminal that automatically moves the Stop Loss level if the open position becomes profitable by a specified number of points. In other words, the terminal moves the Stop Loss level following the price at a distance of the Trailing Stop value.
How does Trailing Stop work?
Let's say you opened an order to buy the EUR/USD at a price of 1.29034. Then you set a Trailing Stop of 40 points. This means that when the price reaches the level of 1.29074 (1.29034 + 40) due to the positive dynamics of the market, the terminal will automatically set the Stop Loss at the level of 1.29034. I.e. Stop Loss will be set up at the breakeven level. If the market continues to grow and reaches the level of 1.29114, the terminal will move the Stop Loss from 1.29034 to 1.29074. Every time the current price exceeds the selected value, Trailing Stop moves the Stop Loss level. If the profit of the position decreases, Stop Loss level is not adjusted.
It is important to keep in mind that Trailing Stop is executed only when the trading terminal is launched and connected to the server. If the trading platform is disabled or loses Internet connection, the last set Stop Loss value will be valid for the server.
MT4 only supports one set Trailing Stop per symbol. If several positions are opened in the same trading instrument with an active Trailing Stop, only the Trailing Stop of the position that was opened last is valid.
How to set up a Trailing Stop?
Trailing Stop is always linked to an open trade. To place a Trailing Stop, you need to right-click on any open position in the Trade tab in the Terminal window.
In the right-click menu, move the cursor over Trailing Stop. After that, specify the Trailing Stop size in the new pop-up window. The minimum Trailing Stop size is 15 points. After setting up Trailing Stop, a corresponding entry is created in the Journal tab. Each automatic Trailing Stop modification also creates a log entry.
To disable Trailing Stop from the selected position, select the “None” parameter. The “Delete All” command will disable Trailing Stop for all open positions.
Trailing Stop is used to take profit during positive market dynamics. At the same time, the function manages the amount of potential losses at the level of the planned Stop Loss. Trailing Stop is a basic terminal function that every novice trader should master.
Article last updated: 2022-05-11