The selection of the appropriate risk management tools is the most efficient part of a successful trading strategy. Before entering our site trade, it is essential to have a solid idea of where to exit the trade. Making sure that the trade exits when it is time to exit is among the most difficult challenges that traders face every day. There is however one tool one can utilize to lessen their risk and maximize the profits they earn.

It’s a Trailing Stop. This highly dynamic type of order combines trading automation and risk management. This is a sophisticated order type which automatically follows your position as markets move to your advantage, aids in minimizing the risk of losing. Stop orders are among the best crypto trading tools. They let you sell when the uptrend has ended and to buy as the downtrend kicks in.

Trailing stop order

Stop orders permit traders to create an order that is predetermined for a specific amount or percentage of the market away during price swings. This kind of order can help traders to protect gains and limit the losses when the price of a trade does not change in the direction that is favorable to the trader.

The first step is a short explanation of the Stop Order: Trailing Stop Order:

The type of this order includes the feature of a stop (order trigger) that traces the market in a predefined or defined distance i.e. the trailing distance when price changes in the selected direction. It remains in place when the price is moving in the opposite direction. If the market price gets the price of the stop, the underlying limit or market order is put in place.

Stop order can be used in two ways, either to purchase or sell. Let’s examine each.

Trailing Buy

The trailing buy order tracks the market as it goes down. It triggers a buy order in the event that the price increases from its lowest to the price set as the trailing distance.

Trailing Sale

This order tracks the price of the market in relation to its rise. It triggers a buy request when the price of the market falls by the amount specified as the trailing distance. Stop orders can be considered the ideal way to leave and then enter your existing positions. They can be either long or short.

Let’s review these order types and how Trailing Stop orders function?

The Trailing Stop Sale

A trader could create a sell order above the entry for long-term trading. The trailing price rises by a percentage. If the price of the asset moves upwards then a new stop will be set up. If the price decreases it will stop the trailing price from are moving. In the meantime, a sell request will be placed if the price rises more than the callback rate from the price at which it is highest and gets at the price. The trade is closed with a sell order at market prices.

Let’s now move on to the Trailing Stop Buy Order.

Trailing stop buy

A Trailing Buy Order is an order placed for a short trade just below the entry point of trade. In this type of purchase, the stop price decreases by a trailing percentage. When the price drops to a certain point, a new value is created. And, if the price increases the stop will stop moving, and a buy order is issued if the price moves more than the callback rates from the lowest price until it reaches the stop. It is possible to use trailing buy orders to buy short positions and sell orders for long positions.

What’s the procedure for a trailing stop order work?

A trailing purchase is made at a distance from the starting price you have determined. It only starts trailing when the value of the asset shifts to your advantage. When the price rises the trailing stop is dragged. The trailing stop will remain at the level it was brought up to at the point that price ceases to increase.

Let’s examine a stock that contains the following information to better understand its workings:

Purchase for just $10

The price that was set when setting up the trailing stop = $10.05

Amount trailing = 20

Immediate effective stop loss value = $9.85

If the price of an investment rises to $10.98 the trailing stop will increase to $10.78. If, however, the price drops to $10.90, the stop value remains at $10.78. If the price keeps falling and reaches $10.77 it will prompt an immediate market order. Your order will be calculated on $10.77 as the latest price. If the bid price is $10.76 then the trade will be closed. The net gain for the trader will be $0.76 per share.