Trailing Stop, Take Profit, or Trailing Take profit – Which Order Type is Better?
by Thomas Redfield Trading ConsultantAre you planning to invest
in cryptocurrency? Or you have already started crypto trading, and looking for
the right strategies to earn profits?
Crypto trading is
time-consuming and profitable at the same time. Usually, novice traders invest
10-12 hours while monitoring the charts. But the expert traders use a set of
advanced trading tools like Take Profit, Trailing take profit, bracket order,
etc. to increase their chances of profit.
Among these order types, activating take profit order as a part of your
exit strategy will surely help you.
The expert traders usually
place take profit orders to trade smartly and safely without monitoring the
market 24 x 7. If you want to know about the working of this order type and its
strategies, let’s understand what is take profit order?
Take
Profit order
Take Profit is a type of
limit order that specifies the exact price at which the trader should close out
an open position in a trade for a profit. If the price of the crypto asset you
are trading doesn’t reach the limit price set, the take profit order doesn’t
get fulfilled.
This order type allows the
trader to set a target profit price that ensures that he will make a profit on
this trade. This order type allows the traders to maximize their profits.
Generally, this order type specifies a certain price which is chosen by the
trader above the buying price.
If the price of the crypto
asset you are trading reaches to the limit, it will automatically trigger a
sell order. It’s a kind of limit order where the trader can buy the crypto
assets at a low price or sell them at a higher price.
Let’s understand how it
works with an example:
Let’s say a trader bought 1
Ethereum (ETH) at $5,000, and put take profit +10% which means, you created an
order to sell ETH at a price of $5500. For a while, ETH traded within $5000,
and then continued to grow. Upon
reaching $5500 and above, your pending order with take profit +10% will be
filled, and the system will close the trade with a sell order.
Here your total profit comes
out as $500.
Most often traders use this
order type in combination with stop-loss order so as to limit their losses and
maximize their profits.
Apart from choosing take
profit order, traders can choose Trailing stop order like Trailing buy or
Trailing stop sell orders. Let’s understand in brief about Trailing Stop order.
Trailing
Stop
The idea behind Trailing
stop order is quite simple. In this order type, a value either a percentage or
fixed amount is set after a position has been entered into, typically as a stop
loss order. And, when that value is reached through the price drop in
cryptocurrency, the decision to sell that particular crypto asset is made
automatically.
This order type only moves
up which means that if the crypto asset price is rising, your stop order will
trail behind it to the defined value and you will always keep those increasing
profit.
Let’s understand it with an example:
Suppose a crypto trader is
holding a long position of BTCUSD contracts at $10,000 and a trailing distance
has been set at $500. Once the last traded price goes up, the Trailing Stop
will move in the upward direction and will maintain the trailing distance of
$500.
If the last traded price
moves up to 10,600 USD, the Trailing Stop Price will automatically be adjusted
to $10,100 and locks in the profit. This means that the Stop Loss will trigger
only if the price drops by $500 from the highest price reached. However, if the
price never went up the Trailing Stop will be triggered a $9,500 just like a
normal Stop Loss.
Growlonix allows its traders to use Trailing Stop orders like Trailing Stop sell or Trailing Buy order, Trailing stop loss and more. This is the best crypto trading platform that offers trading bots to automate the take profit, Trailing stop and other strategies of the traders. Since these bots let traders place orders safely, the traders have to set the percentage of the profit which they need.
The Trailing buy stop order
is placed at a fixed amount above the current market price. As the price of crypto asset falls, the
trigger price is adjusted so that it is never more than a specified value or
trail from the market price. If the price increases, the trigger price doesn’t
adjust. And, the asset will be purchased at the best price. On the other side,
Trailing Stop sell order is just reverse of this order type.
The other most popular strategy which traders can use to lock in their profits or increase their gain is Trailing Take Profit. Let’s understand it in deep:
Trailing
take profit
This is one of the most popular and useful trading strategies in crypto trading. Its goal is to increase profits. When the Take profit value is reached, but the price moves further into the profit zone, the position will not close.
And, Trailing Take profit will continue to follow the price, and at the slightest movement back, it will close automatically with a larger percentage of profit than choosing simple take profit order. This order type is designed to lock in profits and limiting the losses of the trader.
If the trailing take profit moves up, then it will not move back. Thus, this is the most profitable order type that will prevent your losses.
Let’s understand how this order type works:
Imagine that you bought ETH for
$10,000 and set a take profit order at $11,000, trailing take profit for 5%. If
the Ethereum (ETH) price climbed to $10,500, the order is not executed as the
point at $11000 has not been hit.
- If the ETH price climbed to
$11000, a stop market order at $10450 would be placed.
- If the ETH price dropped to
$10500, the stop-limit order is still at $10450
- If the ETH price climbed to
$12000, the stop order jumps to $11400.
- If the ETH price falls to
$11000, the stop-loss order at $11400 is executed.
As you can get, without the trailing
take profit feature, you would earn less, missing the price at $11400, and your
ETH would have been sold at $11000. Growlonix lets its traders place this
order type automatically using a bot.
Conclusion
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Created on Apr 12th 2024 22:21. Viewed 46 times.