Give More Control over Risk Management with a Trailing Buy order!

by Trailing Crypto cryptocurrency experts

Do you know about advanced trading? In all kinds of short-term or long-term investing, deciding the most appropriate time to exit any position while minimizing the potential risks is as important as you enter a trade.

Investors can’t monitor their portfolios 24 x 7, and therefore, they need a way to protect themselves from major losses. When it comes to crypto trading, it is important for a trader to control all his risks.

Thankfully, there are advanced orders that traders can use to automatically exit a position before the losses start. Expert traders use a risk management technique to maximize their earnings and minimize losses. And, one such technique or advanced order type that you can choose is Trailing Stop order. It’s a kind of stop-loss technique where a sell order executes once the asset’s price is dropped by a specific percentage which is calculated based on the asset’s highest price since its purchase.

Trailing Stops

Everyone from the day-traders or the long-term investors can enjoy the benefits from the Trailing stop orders. It’s a kind of safeguard against unwanted price changes.  Trailing Stops are the type of advanced orders to buy or sell securities if they move in a direction which a trader might consider unfavorable. There are two basic trailing order types which traders can use when it comes to crypto trading. One such order type is Trailing Buy, and other one is Trailing Sell.

Traders can consider a Trailing Buy order to go long as it follows the asset price as its price move downwards. The order gets triggered as soon as the trend reverts, and the price rises from its low by the preset trailing distance. This order type not only allows you to buy an asset at a low price but also maximizes your chances to make a profit exactly at the time whenever the price stops falling.

On the other side, Trailing Sell order is the exact reverse. It trails the price of an asset as the price goes up. This order type allows you to sell the assets at a higher price while making good profits.

Benefits of Using Trailing Stop Buy/Sell Orders

Trailing Stop Buy

Suppose a trader wants to enter a long position with a Trailing Buy. He expects that the price may go back up after a sharp decline in upcoming news by Elon Musk. Now you are worried that the price might drop further before rebounding. Now, what is the most perfect way here to establish a position under such circumstances?

Of course, setting up Trailing Stop buy is the best solution. Set this order type at a certain trailing distance and wait. The order trigger will follow the current market trends. If the price moves lower, the trigger will be moved lower and if the price increases, the order trigger will remain in place. And, the order will be executed whenever the price rises by trailing distance after the current low.

Trailing Stop orders can be used to both enter and exit a position. Whenever you enter a position with Trailing Stop, you are referring to Trailing Buy (If long position) or Trailing Sell (If Short position). And, whenever you want to exit your position with Trailing Stop, it’s better to choose Trailing Take Profit or Trailing Stop Loss. In fact, while you are using Trailing Stop to exit a position it will possess the qualities of both Take Profit and Stop Loss.

That’s what makes this order type so perfect and great! You might also have heard about trailing Stop in the context of Take Profit orders. Which one is better? Let’s understand this order type too:

Take Profit order

Of course, you may go with Take Profit (TP) or Trailing Take Profit orders to ride the double-digit gains in crypto trading. Take Profit orders are used to set a predetermined target price/level at which you would like the crypto trading platform to close a trade while securing the profits.

This order type locks in the profit whenever an asset price reaches to a certain level. If the price of an asset reaches to the set limit, it will trigger a sale automatically. But if the price doesn’t reach to that limit, the order will not act.

This is a kind of short-term strategy and useful for those traders who want to enjoy the benefits of a sudden rise in the price of assets. This trading strategy lets traders make immediate profits. Let’s understand how this order type works:

Let’s say a trader has bought ETH at $100 and he sets a take profit at 10%. This means, if the price reaches to $110, this order will be triggered and trade will be closed. Another benefit of using TP order is that you need not watch the market continuously; the order will be executed automatically. Most of the traders use this order in conjunction with a Stop Loss order to manage their positions.

If the asset price reaches to TP limit, the TP order will be executed, and the position will be closed. And, if the asset price falls to the preset stop-loss point, the stop-loss order will be executed and the position is closed. This was about Take Profit.  But there is another strategy which traders can choose is Trailing Take Profit. In this order type, the trader has to choose the regular take profit and trailing distance. Once the TP orders reaches the trailing distance, it will work as the new selling price of an asset.

So, if you really want to maximize your gains, you can’t avoid using Take Profit and trailing stops in your crypto trading strategy. The best crypto trading platforms like TrailingCrypto give their traders full control over their trades. You should note that choosing the right order type is important, but setting up stop-loss at an appropriate distance is more crucial. Make sure to choose the right strategy and the best trading terminal to automate your trades.

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Created on Apr 18th 2022 11:42. Viewed 119 times.

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