The principles for using trailing stop-loss are as follows:
1. Set the trailing stop to a percentage or amount of the current market price.** For example, if the trailing stop is set to 10%, the market price must move 10% in order to stop the loss.
2. Choose the type of trailing stop you want** There are 2 commonly used types of trailing stops:
* **Fixed trailing stop** (Fixed trailing stop) is a trailing stop that moves at a fixed rate, such as 10%. For example, if the trailing stop is set to 10%, the market price must move 10% in order to stop loss. Regardless of movement in any direction
* **Trailing stop adjusted according to the market** (Dynamic trailing stop) is a trailing stop that moves with the market price, such as 10 pips. For example, if the trailing stop is set at 10 pips, the market price must move 10 pips in order to stop loss. If the market price moves up 10 pips, the Trailing stop will also move up with the market price.
3. Set the trailing stop to suit your risk tolerance and trading strategy.** For example, if you have a low risk tolerance, You may choose to set your trailing stop at a lower percentage, such as 5%, if you have a higher risk. You may choose to set your trailing stop at a higher percentage, such as 15%.
4. Monitor your trailing stop regularly** Make sure your trailing stop remains appropriate to the current market situation. If the market moves violently You may need to adjust your trailing stop accordingly.
Using a trailing stop has the following advantages and disadvantages:
strength
* Helps limit losses
* Helps lock in profits
* Reduces the risk of being whipsawed
weakness
* You may miss out on profit opportunities if the market moves quickly.
* Can be complex and time consuming to manage
In summary, using a trailing stop is a powerful tool that can help limit losses and lock in profits. However, it is important to understand the pros and cons of trailing stops and use them appropriately to get the best results.
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