what is a trailing stop-loss?

This is a discussion on what is a trailing stop-loss? within the First Steps forums, part of the Reception category; Can anybody please explain in the most simplest of terms what a trailing stop loss is and how it is ...

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Old May 29, 2003, 9:49am   #1
Joined Apr 2003
what is a trailing stop-loss?

Can anybody please explain in the most simplest of terms what a trailing stop loss is and how it is applied?
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Old May 29, 2003, 10:23am   #2
 
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Hi,

It is described in the T2W Glossary here... http://www.trade2win.co.uk/boards/glossary.php?s=&ltr=T

As an example...

If you bought at 100, you would put a (fixed) stop loss at 90. If the market rose to, say, 120 then fell back to 90 you would get stopped out at 90 and lose 10 points.

If you bought at 100 and put a 10 point trailing stop loss in it would start at 90 but then each point the market went up the stop loss would move up with it - but if the market moves down the stop loss doesn't. So if the market went to 105 your stop would go to 95. If the market fell to 97 your stop would stay at 95. If the market then went to 120 your stop would rise to 110. If the market then fell to 110 or below you would get stopped out.

Obviously, reverse for going short.

The advantages are that you minimise losses and lock in profits. The disadvantages are that it is easy for a reversal to come back and knock out of the market before carrying on upwards.

HTH
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Old May 29, 2003, 1:50pm   #3
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grubs50 started this thread Thx 4 the very clear and precise explanation. Can one use it for every trade and is it available with all SB companies?
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Old May 29, 2003, 1:54pm   #4
 
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I know that IG have just started allowing you to alter stops online during a trade.
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Old May 29, 2003, 1:56pm   #5
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grubs50 started this thread how does it work with them (IGINDEX)?
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Old May 29, 2003, 2:22pm   #6
 
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You place your trade and enter a stop there and then.
Once the trade is open, all you need to do is click on the trade in the 'open trades' area and it allows you to enter a new stop level.
So as the price goes in your favour you can amend the stop if you like, to lock in some profits
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Old May 29, 2003, 2:36pm   #7
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grubs50 started this thread I'm a bit of a novice so i still don't understand how one locks in profits doing this, so i will be most grateful if u can elaborate on this point. thx
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Old May 29, 2003, 2:47pm   #8
 
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I.G Helpdesk

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Old May 29, 2003, 3:03pm   #9
 
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grubs50,

I'm not sure if any SBs offer auto trailing stops (one's where their computer trails the stop for you), but you can do it manually with most (just by cancelling your old stop and putting in a new one). IB does auto trailing stops.

What Wideboy means by 'locking in profit' is that, in my first example above, the market went to 120 but you still lost 10 points (when it fell back to 90). But by having a trailing stop (in the second example) you have 'locked in' 10 points of profit so when the the market falls from 120 to 90 you actually still make 10 points of profit (cause you were stopped out at 110).

Hope that's clearer.
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Old May 29, 2003, 3:05pm   #10
 
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If the price goes in your favour after you enter a trade, and you move your stop loss to your actual entry level, then you can let the trade run and the worst that can happen is you will be stopped out for 0.
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