How does the trailing stop work? | Forex Factory

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How does the trailing stop work?

  • #1
  • First Post: Nov 1, 2006 11:50am Nov 1, 2006 11:50am
sorry newbie question. How does the trailing stop works? For what purpose?

Thanks in advance
  • #2
  • Nov 1, 2006 12:07pm Nov 1, 2006 12:07pm
Her you go.

http://www.investopedia.com/terms/t/trailingstop.asp

this should help


Quoting stonie
sorry newbie question. How does the trailing stop works? For what purpose?

Thanks in advance
  • #3
  • Edited 4:47pm Nov 14, 2006 12:05pm | Edited 4:47pm
Thanks for the above links.


Anyone have an example or clearer picture of this?
  • #4
  • Nov 14, 2006 4:20pm Nov 14, 2006 4:20pm
Hi,

I changed the title to be more descriptive.

Best regards
Alan
  • #5
  • Nov 14, 2006 4:46pm Nov 14, 2006 4:46pm
Thanks
  • #6
  • Nov 14, 2006 11:41pm Nov 14, 2006 11:41pm
so when you have a trailing stop, there no need to put in an acutal stop???

your computer does not need be on right?
  • #7
  • Nov 15, 2006 3:20am Nov 15, 2006 3:20am
Trailing stops work differently based on the broker/platform.
Some trail in increments (15 pip trailing stop only moves the stop after the price has moved 15 pips in a given direction. it moves again after another 15 pips), others are pip-for-pip trailing stops (stop moves each time price moves one pip in a given direction, keeping the stop a fixed maximum number of pips away from the current price).
Some brokers have trailing stops that work on the server. Others (metatrader based brokers for example) work on the client end, meaning you turn off your system, and the stop stays where you left it last.
In some cases a trailing stop means you manually move your stop up when you want to reduce risk/lock in profits, as some brokers don't support trailing stops on their platform.
The last distinction I can think of now is that there are a couple of brokers that allow you to set trailing stops but, until price has moved in a given direction by the trail distance, you won't have a stop on your order unless you set a separate stop. So you buy at 1.2235 with a 15 pip trailing stop. IF price then drops 100 pips, you won't be stopped out, but if price moves to 1.2250, you'll then have a stop at 1.2235. If, instead you set a manual stop at 1.2200, when price moves to 1.2250, the stop moves to 1.2215 (not 1.2235).

As each broker may have different methods for trailing stops, it's important to check the broker's documetation and find out exactly how their trailing stops work.
  • #8
  • Nov 15, 2006 4:00am Nov 15, 2006 4:00am
Quoting jarius
Trailing stops work differently based on the broker/platform.
Some trail in increments (15 pip trailing stop only moves the stop after the price has moved 15 pips in a given direction. it moves again after another 15 pips), others are pip-for-pip trailing stops (stop moves each time price moves one pip in a given direction, keeping the stop a fixed maximum number of pips away from the current price).
Some brokers have trailing stops that work on the server. Others (metatrader based brokers for example) work on the client end, meaning you turn off your system, and the stop stays where you left it last.
In some cases a trailing stop means you manually move your stop up when you want to reduce risk/lock in profits, as some brokers don't support trailing stops on their platform.
The last distinction I can think of now is that there are a couple of brokers that allow you to set trailing stops but, until price has moved in a given direction by the trail distance, you won't have a stop on your order unless you set a separate stop. So you buy at 1.2235 with a 15 pip trailing stop. IF price then drops 100 pips, you won't be stopped out, but if price moves to 1.2250, you'll then have a stop at 1.2235. If, instead you set a manual stop at 1.2200, when price moves to 1.2250, the stop moves to 1.2215 (not 1.2235).

As each broker may have different methods for trailing stops, it's important to check the broker's documetation and find out exactly how their trailing stops work.
Thank you so much for ur time. Now i have a better picture of it
  • #9
  • Last Post: Nov 15, 2006 5:39am Nov 15, 2006 5:39am
Quoting stonie
Thank you so much for ur time. Now i have a better picture of it
No problem. I found out the hard way there wasn't one simple trailing stop. i was hit with that last condition. i put in an order and went off happy with the knowledge that i had my trailing stop in. found out later that there was no stop when i came back to a very losing position. but, good thing was i was in with a VERY small account, trading 1k lots (0.10/pip). It may have even been demo, i don't really remember. In any case, wasn't nice to find out that way. Since then I learn the order types and test them out thoroughly on my platforms.
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