First we have to discuss about stop loss and then the trailing stop loss. The stop loss is mandatory functional key points that are used while trading. A stop-loss order helps you to protect your profit and limit your losses. Some of the traders are not believe in stop loss because of their fear. They are not put stop loss properly. But we cannot predict the nature of a particular trade if u don’t place the stop loss correctly it may give you a huge loss so it’s better to set the stop loss value. A stop-loss is an order to sell a security when it reaches a given price. Stop-loss sell order is designed to limit an investor’s stop loss on a particular stock.
The stop loss can be divided into two categories. Trailing stop loss and manual stop loss. The manual stop loss can be placed by our own view according to the market movements in the case of trailing stop loss it can be automatically changes according to the market changes they are very helpful to the professional traders. A regular stop-loss must be changed manually rather than trailing stop-loss. Trailing stop-loss is adjusted automatically based on predefined amount or percentage. The stop loss is very fear full to some customers. Do not fear about stop loss it will help you a lot.
The main drawback of manual stop loss is that a common man cannot predict the nature and flow of the market it has its own structure; a single trader is beyond the market condition. We have to go through with the market and not go against the market condition it may leads to the complexity in trading life. If we put stop loss according to our point of view without any technical analysis there is no use of it.
In most of the trading software’s they are using trailing stop loss because it is mostly preferred by the professional traders. A stop loss is designed to limit an investor’s loss on a security position. Stop loss is an order placed with a broker to buy/sell a stock when it reaches a particular price value. Setting a stop Orders OR stop limit orders needs extra knowledge. Once activated the Stop loss orders, they are initiate a market order. Usually they are activated below the stop price. The main use of trailing stop loss is that we can change the value according to the market movement.
As its name suggest stop loss is paced to limit an investor’s loss on a trade in a stock. Stop loss can be used for both long and short trade. But most commonly used for long position. So that investors can protect themselves from huge losses due to unexpected move in the market. For a long trade stop loss order is placed below the bought price and for short trade stop loss order is placed above the sold price.
Most of the traders face problem of taking trading decision. Placement of a stop-loss order provides solution for this problem. Especially useful for one who is on vacation or cannot watch. Stop order is also known as stop market order. The limit order price is also continually recalculated based on the limit offset. A trailing stop loss is better than a traditional stop-loss strategy. By using trailing stop a trader can protect his/her gains by continue their trade in open state and continue to profit as long as the price is moving in the right direction, but closing the trade if the price changes direction by a specified percentage or amount.
If we need a complete support for trading you can purchase good software and it is works on Meta trader is very useful for trading and convenient also. The most of the forex traders are using Metatrader platform because it is very user friendly platform and signal accuracy is so good. The trailing stop loss that is provided in the platform is very essential for both the intraday and positional traders. By using trailing stop loss actually you protect your profit by limiting your loss. This is actually one of the greatest advantages of using trailing stop loss values. Without limiting the amount of profit you actually specify the amount that you are willing to lose here.
Market movements are unpredictable temporary dip and rise will happen all the time. During that temporary price fluctuations please don’t reset your stop loss. If you reset your stop loss effective stop loss may hit at a lower price than what you had expected for. But take an extreme care to reset your stop loss during continuous increment in the chart, especially when the stock is reaching new highs.
When the market shows a substantial upward movement and if your expected target value is crossed already it is necessary to tighten your trailing stop. For example, if you set the stop loss initially to 20 cents after reaching a particular point changes it to 11 cents. So you can escape from an unexpected pullback. You can maximize the benefit of using stop loss by combining trailing and traditional stop loss. But be sure that your first trailing stop loss is deeper than your regular stop loss. One more thing to be noted by a trader is, Always try to set your main stop in accordance with your risk tolerance capacity.
The added advantage of trailing stop is it will only move up or down for a long trade or short trade respectively. The feature of trailing stop loss is that it consistently recalculate the stop loss values and trigger points. Generally, stop loss will remains the same if the price doesn’t change. Using trailing stop loss on active trade is a sign of professionalism. We always need to face high fluctuation and volatility in the market. So trailing stop is a trickier method to fix a minimum profit in such markets where most active traders love to play.
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