Have you ever experienced a condition when your take profit level will be touched, but apparently the price reverses direction and instead touches your stop loss level? If so, then a trailing stop can be one of the ways to deal with these conditions. According to Baby Pips, traders often makes use of trailing stops to lock in profits while minimizing their risk.
A trailing stop is a trading facility that helps you adjust your stop loss more systematically and automatically while trading is still running. Why do you need adjust the stop loss when trading is still running? Shouldn’t the stop loss be set in such a way as to secure a trading position? In fact, you need to do this action to prevent losses because it can make your trading results breakeven. Thus, you can protect the profits you have.
You can use it in your trading management or in your trading strategy to protect opportunities for profit or loss that are out of control due to price reversals.
Then what are the advantages of trailing stop?
Flexible Stop Loss
In trailing stop, your stop loss will follow your entry position. If in a buy position, the stop loss will move up. While in short positions, stop loss will move down. You can also adjust the stop loss movement on the trailing stop with a minimum of 15 pip movements in your MetaTrader.
Anticipating the risk of price reversal
Prices that move unexpectedly become one of the concerns of traders. Similar to stop loss, you can also use a trailing stop in your trading strategy. Even though the price movement will not touch your take profit point and instead reverse the direction of the new stop loss, you will continue to profit because your stop loss is already higher or lower than your initial open position.
Reading more: 5 Reasons Why Volatility Determines Your Profit Opportunities
