How Trailing Stop Orders on Binance and Other Derivatives Ensure Optimum Profits?

by Antonio Boston marketing manager

Crypto trading market is highly volatile. On one side, it can help you earn profits but at the other time, it may also incur heavy losses. There are situations when a trader wants to avoid high losses, but trends go against him. In such a case, the most viable option to exit the trade profitably is to use a kind of stop loss strategy.

 

The goal of a crypto trader is to earn as much profit as possible in a short time from any kind of price movement in the market with an optimum level of risks. And, the best risk insurance tool is making use of stop or stop loss. To maximize profits with minimal risks, the trader can go with either of the two options:

 

·         Setting a take profit and move it periodically along with stop order as the price moves towards the pre-specified value

·         By using Trailing stop orders

 

Among these two options, the first one allows the trader to take the maximum of the price movement in current market trends. But, here the trader has to watch the market trends continuously and close the trade as soon as possible if there is a reverse movement. But in the second option, the trader will earn profits in long term and this order works automatically. Trailing stop is an advanced order that allows you to maximize profits while limiting the downside risks. Usually, the expert and seasoned traders use trailing stops.

 

So traders! don’t waste your time seeking the right moment to buy or sell any crypto asset. Rather, you should go with Trailing Stop orders from TrailingCrypto to reduce risk and increase the profit potential. This order will unlock multiple opportunities for you to get the most from your crypto trading.

 

Let’s understand about Trailing Stop order in deep:

 

What is a Trailing stop order?

 

A trailing stop order is the perfect crypto trading tool that allows you to enter or exit the positions at the right moment. This order type is a variation of stop order that adjusts to market movements at a fixed value or percentage.

 

A trailing stop order can only move in one direction as it is meant to limit the amount of risks which crypto traders are willing to bear. For example: if the trailing stop is set to 20% in a long position, then the crypto asset will be sold immediately if the price of an asset decreases by 20% from the buying price. The usage of trailing stop order generally varies depending on the platform you have chosen like Binance, BitMEX, etc.

 

So, Trailing stop is an order with a stop loss which trails the market price by a specified/fixed amount or percentage whenever the price moves in favorable direction. And, if the price moves in opposite direction, this order type will protect the trader from the rapid changes in the market. With a spot trailing stop order at Binance, the trader can place preset orders at some specific/fixed distance away from the current market price of the asset.

 

If the price moves in the favorable direction, this order will lock-in profit by enabling the trade to remain open and continue to earn profits. But if the price moves in the opposite direction, this order type will be executed as a limit order. This way, you can protect gains and minimize losses.

 

How does a Trailing stop order work?

 

Trailing stop order can be used in two ways: Trailing stop buy and Trailing Stop sell. In the trailing buy strategy, the traders can go long. This order follows the market price as it goes down and a buy order will be triggered whenever the price rises from its pre-specified amount set as trailing distance. For a long trade, the selling price is supposed to be higher than the last price of the asset.

 

When the price moves up, the trailing price also moves up and if the price drops, the trailing price will stop following. While using trailing stop, make sure to keep it at a safer distance to avoid losses. The trailing stop sell order is just opposite to the trailing stop buy.

 

The trailing stop sell order can be used to restrict the potential downside without capping your potential gains. This order is the best option when you want to exit a long position. The order follows the market price as it moves up and triggers the sell order if the price falls from its current high by the amount set as the trailing distance.

 

·         While placing a buy trailing stop order, the stop price will be lower than the current market price, and on the other side, for a trailing stop sell Binance order the stop price will be higher than the market price.

·         If your trigger price is more than the market price of the asset, the buy/long will get disabled, and vice versa.

 

Trailing Stop example

 

Let’s say, a trader bought a crypto asset XYZ at $120, you could enter a trailing stop order to sell your asset with a specific price or trailing value. This trailing percentage or value will determine how far away the stop order trails the market price. If we set the trailing value to $10, this would mean our stop order ‘starts’ at $110. If XYZ falls by the trailing value ($10) at any time after placing your trade, our sell order will be triggered.

 

·         If the price of the asset moves up to $130, the trailing stop order will also move up to $120 with a trailing value of $10

·         And, if the price of asset continues to increase and reaches to $150, the trailing stop will also move up to $140

 

Once the asset price has risen to $155 and if it drops suddenly by $10 or more, the trailing stop will trigger at $145 and a market order will be placed. This means your order will be executed at the best price at that time.

 

More examples:

 

For a sell order, you can set it below the market price like the below example:

 

A. If you position with 1 BTC priced at 20000 USDT:

 

·         Trigger price 21,000 USDT

·         Trailing value 2000 USDT

·         Quantity 1 BTC

 

B. If the market price hits 21,000 USDT, the trailing stop order will be activated at a stop price of 2000USDT i.e. 21000–2000 = 19000 USDT

 

C. If the market price drops to 21000 USDT from rising to 25000 USDT, the stop price will remain at 20000 USDT

 

D. But if the market price drops from 28000 USDT to 26000 USDT, the stop price will remain at 26000 USDT

 

Once the market price of the asset drops to 26000 USDT, the stop order will be triggered, and a market sell order will be placed.

 

Another Example

 

For a buy order, you can set it as per the below scenario:

 

A. Create a trailing stop with:

 

·         Trigger price 25000 USDT

·         Trailing value 2000 USDT

·         Quantity 1 BTC

 

B. As the market price hits 25000 USDT, the trailing stop will be activated at 27000 USDT

 

C. The market price goes to 21000 USDT, and the stop price remains at 23000 USDT

 

D. As soon as the market moves up by 21000 USDT, the stop order will be triggered, and a buy order will be placed.

 

Traders can use trailing stop orders for both the spot and futures markets. You can set a trigger price to activate the order at your desired price of the asset. If you don’t enter a trigger price, the trailing stop will be activated automatically at the current market price of the asset.

 

To activate a trailing stop order, there are two conditions:

 

1. A buy trailing stop order will be activated if the activation price >= lowest price and the rebound rate >= trailing delta

 

2. And, a sell trailing stop order is triggered if activation price <= highest price and the rebound rate >= trailing delta

 

Here the activation price is the desired price level of the trader. Trailing delta is the percentage of movement in the opposite direction that a trader is willing to tolerate.

 

Using Trailing Stop at Binance Futures

 

At TrailingCrypto, the traders can use Trailing stop sell Binance strategies on futures markets to earn profits up to 125x. With Trailing stop buy/sell order at Binance, the traders can enter or exit the trades at Binance Futures at the best prices. Try it now to take advantage of several trading opportunities in the market.

 

Make sure to revise your trailing stop strategy timely due to the constant price fluctuations in the market. The crypto trader must always carefully consider whether a trade is consistent with their risk tolerance, financial ability, investment experience, and other considerations that may be relevant to them. Other than the range of price changes, revise the activation price based on your targeted profitability levels and acceptable losses as per your budget.

 

Understanding current market trends and technical indicators can help you make trading and investing decisions in crypto assets. There are numerous patterns and indications that you may investigate. Want to know more? Register yourself at TrailingCrypto and learn everything about crypto, trading bots, trading strategies, and more.

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Created on Oct 29th 2023 11:40. Viewed 93 times.

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