Having a trailing stop order is an excellent way to lock in a profit when price starts to go up or down. It works by automatically tracking the current price and then closing the trade when it moves in a favorable direction. Traders can choose either a mark price or last price as the trigger for the order. The mark price is the price at which the trailing stop will be activated. If the price is not reached when the trailing stop is activated, the order will be reset to the new high minus the trailing amount.
Trailing stop orders can be used in combination with stop buys. If a price moves in a favorable direction, the trailing stop will move in a specified percentage. The percentage can be manually entered or can be pre-set. For example, if you have a long position, you may want to sell 50% of the position to capture the trend. Then you can hold the other 50% to ride the trend.
Binance trailing stop can only be triggered during regular market hours. This means that they will not work if the stock is not open for trading. Markets can also be volatile, which can result in a lower execution price than the one set by the trailing stop. In these circumstances, a standard stop order may be more appropriate. You can also use the Average True Range (ATR) indicator to set a volatility-based trailing stop.
To activate the trailing stop, you must set the activation price to a value greater than the current market value. It should not be too close to the entry price. Similarly, the activation price must be higher than the market’s highest price and lower than the market’s lowest price. This way, the trailing stop will be triggered whenever the price crosses the activation price. The difference between the market’s highest price and the activation price is the callback rate. The callback rate can be set to a value between 0.1% and 5%. The lower the callback rate, the better during normal market conditions. The higher the callback rate, the better during volatile periods.
When the trailing stop order is activated, it will automatically track the current price and then close the trade at the market’s price when the price goes in a favorable direction. When the price goes in a negative direction, the trailing stop order will be reset to the new high – minus the trailing amount – to track further price changes. The trailing stop can also be configured to a percentage to lock in a profit. The percentage can be manually entered or can vary as the trigger price is recalculated.
Traders can choose to use a 50-period Moving Average to ride the medium-term trend or a 20-period Moving Average to ride a short-term trend. The callback rate can be a percentage of the difference between the market’s current price and the activation price.
Trailing stop orders are a great way to lock in a profit, but you should be aware of the risks associated with them. Traders should understand the indicators and trends in order to make better investment decisions.
