Forex trading education - Trailing Stop
I want to teach you an interesting trading strategy. You have the ability to shift the stop-loss, and with little risk you are able to make a lot of money. The strategy is applied through a trailing stop. For example, you've entered a transaction of 100,000 Euros, every pip worth oneUSD, at 1.5220, and you've defined stop-loss at $50, which means that the transaction will be automatically closed at an exchange rate of 1.5170. If the exchange rate reaches the stop-loss order rate, then we've lost 50 USD. The next day we perform another transaction, and again we arrive at the stop-loss limit. We've lost another 50 USD.
the day has finally come, and in the third transaction the exchange rate begins to rise. By the end of the day the exchange rate rose by 100 pips. Now we can raise the stop-loss limit to the point of entry. Now we lose no money in the transaction. We are now involved in a transaction with the potential of infinite profit without risk.
It will either fall back down to the original entry rate for which we set the stop-loss at, or a rising trend will develop. What is a rising trend? A rising trend is a situation in which the exchange rate begins to rise and rise. In the global financial markets there are always trends Trends of 700 pips, 1000 pips or even more can by noticed.
Back to our story: The next day, the Euro rises by 100 pips. when it is 200 pips above the rate of purchase, we can move the stop-loss limit higher.
It is very similar to wave surfing: as long as the wave has not ended we don't get out. If it is a transaction of 10,000 Euros and each pip is worth $1, then a mediocre wave of 700 USD, or if we get on a bigger wave, we can profit 1,500 USD in a week or two with a risk of 50 USD.
In many trading platforms there is a "trailing stop" order, which means that there is an automatic trailing stop, you don't have to sit in front of the computer all the time. Such an order follows every movement of every pip in the market and the stop adjusts itself accordingly.
Whats Next?
* Take profit order
Or go back to the education index
the day has finally come, and in the third transaction the exchange rate begins to rise. By the end of the day the exchange rate rose by 100 pips. Now we can raise the stop-loss limit to the point of entry. Now we lose no money in the transaction. We are now involved in a transaction with the potential of infinite profit without risk.
It will either fall back down to the original entry rate for which we set the stop-loss at, or a rising trend will develop. What is a rising trend? A rising trend is a situation in which the exchange rate begins to rise and rise. In the global financial markets there are always trends Trends of 700 pips, 1000 pips or even more can by noticed.
Back to our story: The next day, the Euro rises by 100 pips. when it is 200 pips above the rate of purchase, we can move the stop-loss limit higher.
It is very similar to wave surfing: as long as the wave has not ended we don't get out. If it is a transaction of 10,000 Euros and each pip is worth $1, then a mediocre wave of 700 USD, or if we get on a bigger wave, we can profit 1,500 USD in a week or two with a risk of 50 USD.
In many trading platforms there is a "trailing stop" order, which means that there is an automatic trailing stop, you don't have to sit in front of the computer all the time. Such an order follows every movement of every pip in the market and the stop adjusts itself accordingly.
Whats Next?
* Take profit order
Or go back to the education index
