What is trailing stop loss order in Forex? Everything you need to know

What is trailing stop loss order in Forex? Today, we discuss the key properties of this useful feature in Forex, its benefits, and working principles. Dig in!

AtoZMarkets.com Money and risk management is one of the essential parts of success in Forex trading. How do you manage your trading positions? Do you have any specific techniques or plan for it? Some of the Forex traders prefer to use the trailing stop loss in order to maximize the profits.

What Is Trailing Stop Loss Order in Forex? 

What is trailing stop loss order in Forex and how does it work?

A trailing stop loss is a specific technique that allows you to set it the stop loss on an open position and then move it further as the price moves towards the target. Some of the trading platforms offer you this feature. One of such – MetaTrader 4.

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How Does a Trailing Stop Loss Work?

Let’s imagine you have set 100 pips stop loss with 50 pips trailing stop loss. Bear in mind that the trailing stop loss is inactive as long as the position does not bring you profit. Once the position goes to profits for 50 pips, the trailing stop loss shifts the stop loss to breakeven.

Afterward, in case of the price reversal, the stop loss remains at breakeven and the trailing stop loss is also stable. However, if the price continues to move further towards the desired level, the trailing stop loss pushed the stop loss one point further. For each of the 50 pips of profit, the trailing stop loss is moving stop loss one point in front. Thus, in case the position hits 100 pips profit eventually, the stop loss will be shifted 50 pips higher than the entry price.

In this way, you can make sure you are maximizing your profits.

See also: 5 best methods to avoid premature stop-loss triggers

Trailing Stop Loss without Stop Loss Setting

In case you set a trailing stop loss without any stop loss for your position, then the trailing stop loss will automatically set a stop loss at breakeven at the moment when it would move the stop loss to breakeven.

Trailing stop loss is working only when you are at your computer and your broker’s server does not know about these operations. The server is registering the stop loss and target orders while leaving the trailing stop loss orders out of the attention. Therefore, keep in mind that in case you shut down your PC or the trading platform, your trailing stop loss will no longer be active.

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