Modern Forex traders aim to fix dealing risks, and this is quite reasonable. For example, if the price of an asset goes sharply against a market participant, the trader has the opportunity to sell the asset at a predetermined price. Below, you will learn how the Trailing Stop works and how it is good for an investor, and why your chances of making a profit with minimal risks increase significantly with the DotBig exchange.
Trailing Stops in Simple Terms
Well, Trailing Stop is a dynamic order that functions as a Stop-Loss, but catches up with the rising price. For example, if the price of an asset goes up, the stop loss automatically moves after it, saving the already accumulated profit. If the price of the asset decreases or there is a reversal, the trailing stop closes positions, triggering like a regular stop order.
What Are Take-Profit and Stop-Loss Orders?
Take-Profit is the level to which the price must reach in order for you to record the maximum planned profit. Stop-Loss is an insurance policy that will limit your loss if the market turns against you. Both orders operate at fixed levels. For example, if you entered into a trade at $200, set TP at $210 and SL at $190, then orders will only work at these levels. To avoid lost profits, you can set TP higher or not use it at all, and close the position manually, while SL remains at $ 190 to protect against losses.
How should Traders Act to Minimize Losses?
To exit the market on time, locking in profits or limiting losses, traders place Take-Profit (TP) and Stop-Loss (SL) orders. In this case, the TP closes the position when the target profit is reached, and the SL closes if the market is moving against it in order to minimize losses. Both orders are triggered automatically as soon as the price touches the set level. This allows the trader not to stay too long in an open position. Thus, a trader enters into a deal, sets limits, and calmly works on other deals.
Installing a Trailing Stop on the DotBig Platform
In most trading platforms including the DotBig broker, the principle of setting a Trailing Stop is similar: it can be set only after the main order is placed. In other words, you can only specify the static Stop Loss value in the order setup window. And then, when an order appears on the chart (market or pending), you can set an extra Trailing Stop.
How to install a Trailing Stop in MT4 terminal:
- Set up an order. For example, open a market deal to buy or sell. An open transaction will appear on the chart as a dotted line – the price level of the sale/purchase of the asset. And in the Terminal window.
- Open the Trailing Stop setup menu by right-clicking. In the list that appears, select the length of the trailing line in points or set your own values. The settings have restrictions on the length of the minimum Trailing stop in points.
- You can delete a Trailing Stop in the same way: right-click on the deal and pick “No” from the list.
The DotBig Forex exchange supports the MT4 terminal, so you can use it to minimize losses when trading online.
Advantages of a Trailing Stop
According to DotBig reviews, Trailing Stop has these pros:
- It insures an open position and allows you to take at least part of the profit in the event of a price reversal. If the dynamic stop of a long position rises above the opening price, considering the spread, you will make a profit of 100%.
- Allows you to take almost the full maximum off the trend. By setting a Take Profit, you limit the potential income, as it is not known how long the trend will last. On the other hand, by constantly moving the Take Profit manually in front of the price, you risk losing even more – the cost can reverse at any second. In the psychology of trading, this is called “greed”. Thus, Trailing Stop solves both of these issues.
- Saves your time. You do not need to constantly check your feet by moving them manually.
Partial Closures on DotBig Website
Partial closures together with Trailing Stops are auxiliary options due to which a part of the trader’s positions is closed (for example, a part of the lot) during a rollback. This function is called a virtual expert Advisor – EA.
Here’s how it works:
- EA tracks the position (trades).
- If the price moves in the direction of profit, EA sets the first rollback price level at a certain distance.
- If the price continues to move in the direction of profit, this profit level continues to modify the rollback level.
- If the price rolls back by the specified number of pips, EA closes part of the lot (volume) from the position (transaction).
- EA sets the next rate level at which the next part of the position will be closed.
- EA activates the TrailingStop function when a part of the position is closed.
- EA keeps on working until the position is 100% closed.
Try Trailing Stops and Partial Closures with DotBig Broker
The international platform DotBig investments provides users with Trailing Stop and partial closures functions. They are suitable for traders with any level of experience and knowledge. But, like any other tool, it requires an understanding of how it works. It is recommended that traders first master trading with a regular stop-loss order and pending orders on a demo account, and then proceed to trailing. These options are available on the DotBig website.