stop loss vs trailing stop

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Afrokid
24
Afrokid  
Pls am little confused here.If I use a stop loss to protect my trade is it still necessary to use a trailing stop? What is the difference between the two? Thanks
Keith Watford
Moderator
18350
Keith Watford  
Afrokid:
Pls am little confused here.If I use a stop loss to protect my trade is it still necessary to use a trailing stop? What is the difference between the two? Thanks

It is never necessary to use a trailing stop. That is personal choice.

A stoploss is the price level that when price moves against your trade, the trade will be closed by the broker at that level.

A trailing stop usually moves the stop loss to break-even level when the trade has moved a certain amount of pips. As the price continues in your favour, the stop loss is moved to trail it.

Afrokid
24
Afrokid  
Keith Watford:

It is never necessary to use a trailing stop. That is personal choice.

A stoploss is the price level that when price moves against your trade, the trade will be closed by the broker at that level.

A trailing stop usually moves the stop loss to break-even level when the trade has moved a certain amount of pips. As the price continues in your favour, the stop loss is moved to trail it.

Thanks, Keith.
Ricardo Penders
444
Ricardo Penders  
Afrokid:
Pls am little confused here.If I use a stop loss to protect my trade is it still necessary to use a trailing stop? What is the difference between the two? Thanks

I think Keith is partially right in that it is never necessary to use a trailing stop, here's why...

I'm using an EA (more info here) which has two options where I can insert a value to optimize profits especially for when the market is trading in between a range on the daily chart and you want to trade the recommended 1H chart for the EA to work best.

The two options are:

  1. Trailing Stop
  2. Breakeven

The breakeven option moves the stop loss to break-even level (which is set manually) when the trade has moved a certain amount of pips (also set manually), and that is all it does.

The Trailing Stop option is almost always enabled when I use the EA just to have an extra option to maximize my profits for when the market continues in my favorite at first and I'm in the money quite a bit and then it suddenly moves against my trade, only then the trailing stop has triggered and has put the stop loss to follow along (in steps set manually, usually I start with a 25 point step), so with every 25 points that the market moves in my favor it will move the stop loss to go along automatically which maximizes my profit when the market eventually decides to go against my favor.

Normally you'll need to keep your eye on the chart and set your trailing stop later on if at all, if you're using the EA I'm using you've set this before you open a new order so you can forget the whole trailing stop thing whatsoever because it will do it for you fully automatic when the time is right.

I hope this was helpful to you and best regards,

Ricardo Penders

William Roeder
19818
William Roeder  
Ricardo Penders: I think Keith is partially right in that it is never necessary to use a trailing stop, here's why...

No, Keith is entirely right. There are

  1. Trail the stop.
  2. Use a Take Profit.

If you use № 2, then there is no need to trail, to break even or otherwise.

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