Stop Loss vs. Trailing Stop Loss

One of the most common ways traders limit their amount of loss on a position is to place a Stop Loss order. With Tradeworks you can apply two different types of Stop Loss orders. The regular Stop Loss, where you set a predefined amount or number of pips you are willing to loose on the position, and a Trailing Stop Loss order. (Read more about how to set a regular Stop Loss)

Benefits of the Trailing Stop Loss  

Both the Stop Loss and the Trailing Stop Loss defines a point that once triggered an order to close the position will be sent to your broker. Where the Slop Loss is a fixed value of number of pips, the Trailing Stop Loss moves when the price is moving your way and remains the same when the price moves against you. This will effectively help you lock in potential profits.

Example

Long EURUSD 1 lot @ 1.12345 (spread 2 pips)

Trailing Stop Loss @ 200 points

Initially the Stop Loss is set at the opening price 1.12345 minus 200 points = 1.12145. If the price drops, and the bid price reaches this value, your position is closed.

If the price goes up to 1.12745 / 1.12747 then the Trailing Stop Loss is moved up to 1.12745 minus 200 points = 1.12545. If the price then drops, and the bid price reaches this value, your position is closed. As a result, although the price just dropped the Trailing Stop Loss closed your position and locked in your profit at 200 points (=20 pips).

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