Grab the Opportunities to Grow Your Profits Using Trailing Stop Orders

Taking out profits and cutting losses short is one of the toughest decisions that you have to make while trading cryptocurrencies. There are some traders who sell their assets as soon as their price increases, while others continue to hold their assets till the market trend reverses. But is this the right way?

Determining the right risk management plan is something that one must include in their trading strategy. It’s better to have a firm idea about where you should plan exiting any particular trade before entering. The best crypto trading platforms like TrailingCrypto offer a variety of order types and advanced tools which traders can consider to trade smartly. These tools allow traders to earn potential profits while minimizing their losses/risks. Managing risks and optimizing profits are the two basic requirements of any successful trade.

What do you do for this?

A popular solution to this is making the right use of Trailing Stops. Implementing Trailing Stop in your trading strategy is something which ensures that you have a robust and agile crypto trading plan. Using such trading strategies helps traders grab profitable results on all their trades. Well, performing all such trades by making use of crypto trading bots is something that you may consider if you don’t have time to watch market trends or if you don’t want to hold your assets for a long period of time.

Depending on your trading strategy, crypto trades can be executed based on technical indicators, current price of asset, market trends, etc. From accumulation to the holding of crypto assets, and choosing from different trading tools to advanced orders like Trailing stop sell, trailing stop buy, etc., the best crypto trading platforms offer the best templates to traders to perform profitable trades.

Trailing Stop

Trailing stop order is a kind of stop-loss order combining risk management and trade management. These orders are also referred to as profit-protecting stops as they help traders to lock in profits on their trades.

Simply, trailing stop is a kind of risk management technique where the trader sets their stop loss level to trail the current market price by the specified value or percentage. In this case, the trailing stop follows the market price at a predefined distance during the trend. This way, this order helps traders to maximize their earnings while minimizing the profit potential.

Trailing stop orders are preferred by expert traders over other orders like stop limit orders as they provide protection against fast market swings. A trailing stop works very smartly. Let’s say there is an asset trading at $1000 and the trader sets a trailing stop at 25% which means if the asset price falls to $750, the asset will be sold.

Seems simple? But no, there is more! What’s that?

Let’s say the asset price has been increased to $2000 and the trailing stop will trail along it. So, if the asset price hits $1250, $1500, or $1750, the trailing stop will be increased to $937.50, $1125, and $1312.50 respectively. And, when the asset price reaches $2000, the trailing stop value will move to $1500.

So, this will further help traders to reduce their downside risks. And, if the asset price reaches $1500, the asset will be sold. Traders can use these orders for placing buy or sell orders in their trades.

How to use Trailing stops?

Generally, the trailing stop orders follow the market price movement of the assets in real-time and stop when the current market changes trends. The operation of Trailing Stop order involves:

· In the long position, the trailing stop price will rise in line with the market and will stop whenever the price of the asset falls. The position will be closed automatically whenever its price falls to the predefined level.

· During the short position, the trailing stop order will follow the downward market movement and will freeze/stop whenever the price rises. This position will be closed automatically whenever the price reaches the set level.

Setting the right level is the key to the successful utilization of the trailing stop order in crypto trading. All this means that the fixed value or the percentage distance from the current market price should be big enough so that minor fluctuations in the market do not trigger trade execution too early. And, at the same time, it should not be small enough so that it doesn’t take up the bulk of your potential gains.

Please note that trailing stop order will be activated whenever it is hit by the predetermined price. If you want to mitigate the inherent risks in the crypto trading market, make sure to advanced techniques used in trailing stops to make the most of the bear market.

Several advanced techniques used in trailing stop for sell orders used by traders are:

· Trailing limit sell

· Trailing stop sell

Trailing Limit sell

This is a popular kind of trailing stop order used by traders to protect them from losing money while maximizing their earnings. This order type is quite different from simple trailing stop orders in a way that stop orders are converted to market orders as soon as the asset price reaches the stop price.

In trailing limit sell order, the limit sell order trails the market price of the crypto pairs. This order combines the stop order with a limit order. Here you will set both,the limit price and stop price, allowing traders to limit their losses while maintaining their control over the selling price.

Let’s understand this with an example:

Suppose a trader places a trailing limit sell order for BTC/USDT and sets a trailing distance as 10%. In this case, the limit sell order will always be 10% away from the market price of BTC/USDT. If the pair moves from 100 to 98.5, the trailing amount recalibrates. This way, the distance between the market price of the crypto pair and the limit sell order will remain at 10%. Here, if the pair BTC/USDT increases in value, the limit sell price doesn’t go down.

With a limit order, you can sell all or part of your position at your limit price or better, or you won’t sell at all. Choosing this order type will protect you from selling the asset into a market that is falling quickly, where your executed price could be much lower than your trigger price.

Trailing limit sell order helps its traders to make from the bearish market trends. In this case, the target price must always be above the market price. As the price of the asset moves down, the target price will also trail downwards. This recalibration continues until when the price of the asset begins to rise. And, here the order will be converted to the market order once after reaching the target price.

The sell trailing stop limit order can be used to build discipline into your trading strategy by providing a way to benefit from potentially higher upside prices, while specifying a limit on the potential downside prices of the asset. This will let you accomplish this without continuously watching the asset price.

Trailing stop sell

This order sets the initial stop price at a fixed distance/percentage below the market price defined as the trailing amount. As the market price rises, the stop sell price will also increase at the preset intervals. On the other side, if this price falls, the stop sell price will remain unchanged.

Whenever the stop price is a hit, the market order will be submitted. This is one of the most popular strategies used by traders in crypto trading so as to limit the maximum possible loss. For trailing stop sell orders, as the market price of asset increases to new highs, the trigger price is recalculated based on the new market price.

The initial “high” is the market price when the trailing stop is first activated, so a “new” high would be the highest price of the asset that it achieves above that initial value. As the price moves above the initial high, the trigger price is reset to the new high minus the trailing amount.

If the price stays the same or falls from the initial high or the highest subsequent high, the trailing stop maintains its current trigger price. If it reaches the stop price, or crosses down through, the trigger price, the trailing stop triggers a market order to sell.

This is a risk management tool which can be used by the traders to specify the conditions that will trigger an order automatically to sell the position.

Let’s understand this order with an example:

If you are buying an asset, say PQR at $2000 each. The price of the asset increases to $2200. Now you would place a trailing stop sell order with a trailing stop price of $100 below the market price. As soon as the price moves in your favor, the trailing stop price will remain $100 below the market price. If the price of PQR reaches $2400, and then drops to some extent, your trailing stop price will remain at $2300 here. And, the asset will be sold at $2300 while the execution price may deviate.

So, in this trade, you have earned a profit of $300 per PQR.

TrailingCrypto allows its traders to place Trailing Limit Sell and Trailing Stop Sell orders easily. Here you can easily access all the major exchanges from a single account by making use of APIs. Simply login to TrailingCrypto, choose the exchange where you wish to place trades. From the orders section, choose order type, like Trailing Stop Sell, Trailing Limit Sell, etc.

Once after choosing the order type, it’s time to enter the required parameters like quantity, offset value, etc. Now, submit the order.

Conclusion

Trailing Stop order strategies are designed brilliantly to help traders enter or exit the trades at the best possible prices while reducing the potential risks. By using advanced order techniques like Trailing stop sell and Trailing limit sell, you can stay in the market as long as you are getting benefits from it while keeping risks in control. TrailingCrypto allows its users to use all such trading techniques and advanced orders to play the trading game smartly.