fx-trailing stops - part 1 (theoretical)
DESCRIPTION
Part 1: Trailing Stops - Theoretical • Advantages of a Trailing Stop • Trailing Stop vs Traditional Stop Loss • An Example Agenda • Reduces the need for you to manually move your stop • Maintains its level when the market moves against you • Adjusts as the market moves in your favor • An advanced type of stop loss order When placing a Trailing Stop, you need to decide how you want to set the following two parameters: 1 – Distance to Market 2 – Trailing Step Distance to Market + Trailing StepTRANSCRIPT
![Page 1: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/1.jpg)
Part 1: Trailing Stops - Theoretical
![Page 2: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/2.jpg)
Agenda
• Advantages of a Trailing Stop• Trailing Stop vs Traditional Stop Loss• An Example
![Page 3: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/3.jpg)
What is a Trailing Stop?
• An advanced type of stop loss order
• Adjusts as the market moves in your favor
• Maintains its level when the market moves against you
• Reduces the need for you to manually move your stop
![Page 4: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/4.jpg)
When placing a Trailing Stop, you need to decide how you want to set the following two parameters:
1 – Distance to Market 2 – Trailing Step
Distance to Market and Trailing Step
Distance to Market
+Trailing
Step
![Page 5: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/5.jpg)
When placing a Trailing Stop, you need to decide how you want to set the following two parameters:
1 – Distance to Market 2 – Trailing Step
Distance to Market and Trailing Step
Distance to Market
+Trailing
Step
Distance to Market + Trailing Step
![Page 6: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/6.jpg)
Trailing Stop vs
Traditional Stop Loss
![Page 7: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/7.jpg)
Trailing Stop Orders vs Traditional Stop Loss Orders• Traditional Stop Loss Order – static
Entry
Limit Order
Traditional Stop Loss
![Page 8: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/8.jpg)
Trailing Stop Orders vs Traditional Stop Loss Orders• Traditional Stop Loss Order – static Limit Order
Traditional Stop Loss
• Trailing Stop Order – dynamically updates the stop price Limit Order
Trailing Stop LossEntry
Entry
![Page 9: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/9.jpg)
An Example
![Page 10: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/10.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
Entry
![Page 11: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/11.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
![Page 12: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/12.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
40 pips
![Page 13: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/13.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
45 pips
![Page 14: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/14.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
50 pips
![Page 15: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/15.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
![Page 16: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/16.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
50 pips
![Page 17: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/17.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
![Page 18: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/18.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
![Page 19: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/19.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
Entry
![Page 20: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/20.jpg)
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
With our trailing stop, we get stopped out at 1.2155 (10 pip profit)
Entry
![Page 21: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/21.jpg)
Entry
Buy EURUSD at 1.2145
Place the trailing stop price at 1.2115
Define Distance to Market as 45 pips and Trailing Step as 5 pips
As the market moves in your favor, your trailing stop adjusts by 5 pip steps
Remember!Distance to Market + Trailing Step
(45 + 5)
As the market moves against you, your trailing stop stays in place
With our trailing stop, we get stopped out at 1.2155 (10 pip profit)
A traditional non-trailing stop order would have been executed at 1.2115 (30 pip loss)
![Page 22: FX-Trailing Stops - Part 1 (Theoretical)](https://reader034.vdocuments.us/reader034/viewer/2022051422/568c38ed1a28ab0235a089b1/html5/thumbnails/22.jpg)
Summary
• Advantages of a Trailing Stop• Trailing Stop vs Traditional Stop Loss• An Example