Common most important question in trading !
How to Trade without making loss ? How to trade safe ?
Then you might be an expert or just using few tools in trading platforms you can trade like an expert. Here we are not going to learn any techniques however just using the tool you can minimize your loss.
You have bought a one share price value@ 100 and setting the Stop loss @75 and Take profit of @125. There are two outcomes in your trade. Either the trade will hit take profit or stop loss. If it take profit you end up with $25 profit similar to stop loss ending up with $25 loss. What If the same share rises @200, after hitting profit then you might think you have missed biggest profit !
How can you prevent from making the latter mistake?
The Trailing stop-loss order is one tool that can help your trade to achieve maximum profit with limited loss . Let’s look at what is trailing stop-loss ? how it works ?
A trailing stop loss is a type of stock order. Using this tool you can procure maximum profit if the price drops or raised certain level depends upon your order type (BUY/SELL).The trailing stop-loss consist of two types. There is the “trailing” component and the “stop-loss” order.
Bought @ 100
Volume: one share
Trailing Stop Loss: @90 or 10%
When the market comes @ 90(10%) your order will be closed(sold) automatically. Thus, it act as a “Stop Loss” and also, if the price reaches @200 without dropping down below 100. When the market comes to 10% down from the current market price @200 i.e Price @ 180 you order will be closed(sold) and protecting your profit of $80.
If the market jumps to 300 without depreciating 10%, then your “Stop-Loss” raised to 270(10% of current market price) you will end with $170 profit. Of course, you can setup the “Trailing-Loss” value to any amount you like. This could be 10%, 15%, or 20%.
A trailing stop limit moves with the market price, and continually recalculates the stop trigger price at a fixed amount below or above the market price, based on the user-defined “trailing” amount. The limit order price is also continually recalculated based on the limit offset.