Catch the Rise with Take Profit and Trailing Take Profit Orders

by Jhorton Jennifer Marketing Consultant

So, you are already familiar with the terms cryptocurrency, trading, order types, etc.? This means you are registered on several exchanges.

There are different types of orders which traders use in crypto trading. This includes stop order, limit order, market order, and more. Apart from these order types, you might have also heard about advanced order types, and Take Profit order is one among them. The traders’ places Take Profit orders so as to trade safely and avoid having to monitor the market 24 x 7.

So, you want to know, how to place the order correctly? Want to know more about it? Let’s understand about Take Profit order first:

Take Profit order - A precise explanation

It is a type of order which locks the profit when the asset price reaches at a certain level. Take Profit execution leads to the position closing with a profit and this order type is always associated with an open position in the market or with the pending orders.

Take Profit order is a tool set by the traders on the crypto trading platform by making use of the best crypto trading bot to exit a position automatically at a predetermined price. This order allows you to achieve higher returns or mitigating the risks.

TrailingCrypto is one of the best crypto trading platforms allowing its traders to set Take Profit orders for their trades. Take Profit orders are the limit orders which are closed when a specific price is reached. These orders are beneficial for the short-term traders who are interested in profiting from a quick bump in the asset price.

The benefit of using a Take Profit order is that the traders do not have to worry about executing the trade manually as the trading bot will execute it automatically.

How does a Take Profit order work?

Ordinary Take Profit order works very simply. When the price of the crypto asset rises to or above the specified price, the crypto exchange will close the deal based on your strategy.

For example:

You bought 1BTC at 10,000 USDT, and set Take Profit +10%

This means, you have created the order to sell Bitcoin at 11,000 USDT. For some time, BTC traded with 1000 USDT, and then continued to grow. Upon reaching at the level of 11,000 USDT and above, your pending order with Take Profit +10% will be filled and the bot will close the trade with a sell.

However, ordinary Take Profit is often not enough to earn good profits. If you want to increase your profit, you should choose Trailing option. This allows you to immediately close the deal when the price reaches the target price in Take Profit. But the trailing follows further if the price rises above the Take Profit level.

And, if the price starts to fall, Trailing Take Profit will automatically close the deal with a greater % profit than using without trailing.

Take Profit with crypto trading bots

Take Profit strategy has a special role in the best crypto trading bots. Since the bots provide safety order and averaging by default, there is no ordinary Take Profit order. Here, you need to set the percentage of profit you need.

If the price of a certain crypto asset drops after buying, the trading bot will place a safety order automatically, and buy additional coins for averaging. And, this will continue until the time the deal is closed. Take Profit percentage specifies how much profit you will earn from a trade as a percentage of the order value.

Take Profit and Trailing Take Profit orders are intended to maximize your profits you would have in trading by trailing or following the price of a crypto asset and determining when to sell that asset, based on whether the price is moving up or down.

What is Trailing Take Profit (TTP) order?

Trailing TP orders are placed by the traders so as to increase the gains whenever price of cryptocurrency moves in a favorable direction.

TTP orders are designed to lock in the profit and limit losses. This order type only moves up once the price has surpassed the previous high and a new high has been established.

If the trailing Take Profit moves up, it cannot move back down. Thus, it will secure profit and prevent losses.

Let’s understand how it works:

Suppose you buy BTC at $10000 and set Take Profit at 11000 and a trailing Take Profit at 5%.

If the price moves up to $10500, nothing will happen as we have set TP at $11,000 which has not been reached.

Now, if the price of BTC goes up to $11000, a stop order at $10,450 will be set. If the price moves down to $10500, the stop order will stay at $10,450.

Then if the BTC price moves up to $12000, the stop order will move to $11400

And, if again it reaches to $11000, the stop order at $11400 will be executed.

Here you will see that without TTP, the buy order would have been sold at $11000. Thus, the trader will miss the opportunity at $11400.

So, TTP is an effective tool that will be activated once a Take Profit order reaches the order price. When it happens, instead of executing the ordinary Take Profit order, the best crypto trading bot will create the trailing order.

How do Take Profit and Trailing Take Profit work?

Take Profit example

Let’s say, you bought BTC at $100 and set a Take Profit at 10%

This means, when the price reaches $110, your Take Profit order will get triggered and the trade will be closed.

Trailing Take Profit example

Trailing Take Profit will not be constant at $110, but it will continue to change based on how the price moves.

For Trailing Take Profit (TTP) orders, we need to define another parameter, Trailing Limit, which means how much the price is allowed to fall from the peak before selling the asset.

Let’s say, you have set the trail limit at 2%, and the TTP order will be placed as:

Take Profit vs. Trailing Take Profit when bought 1 BTC at $100

S. No.	BTC price	TP value at 10%	TTP value with 2% trail	Comments
1	$100	$110	NA
2	$95	$110	NA
3	$111	$110	$107.8	TTP activated
4	$115	$110	$112.7	TTP increases
5	$122	$110	$119.56	TTP increases
6	$120	$110	$119.56	TTP remains the same
7	$119	$110	$119.56	Sold at price <TTP

 

So, Trailing Take Profit will help you maximize the profit and exit the trade at the right time.

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Created on Aug 12th 2021 09:20. Viewed 375 times.

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