Have you ever lost on a bunch of profits on a good crypto asset trading because the market has reversed down suddenly while you were not available on your system?
If yes, you aren’t alone! Unfortunately, this happens to many of us. And, fortunately, there is a tool that can surely prevent this from happening again.
Now, which tool is this?
Here, we are talking about trailing stop orders. This is an order type which preserves profits on open trades. You can either set it manually or automatically through the best crypto trading terminal or platform you are choosing. TrailingCrypto is one such crypto trading platform that allows its traders to place trailing stop orders smartly in the best possible way.
Trailing stop orders are the modification of stop orders which are brilliantly designed for mitigating the trader’s losses and protecting their gains. Stop orders are used to buy or sell any crypto-asset when its price moves past a specified point in the crypto trading market. These can either be stop loss which is an order to sell when the stock price falls below a specified point or these could be stop buy which is an order to buy an asset when its price has risen to a particular price.
Trailing stop orders also work in a similar way and are set relative to the price of a crypto asset at the points of entry or exit a trade. For a long position, the trader places a trailing stop loss order below the current market price of the asset by a fixed price or the percentage. And, inversely, for the short position, you can place a trailing stop buy order above the current market price by a fixed price or percentage.
Here’s an example to understand this:
Suppose a trader bought ETH worth $100 and decides he doesn’t want to lose more than $20 on his trade. But, he wants to take the advantage of price rise. Here he could set a trailing stop on ETH which will automatically sell if the price dips more than $20 below the market price.
The benefits of trailing stop orders are two-fold. Firstly, if the stock moves against the trader, the trailing stop will trigger when ETH hits $80, protecting him from further losses. But if the stock price moves up to $200, the trigger price for trailing stop comes along with it. At a price of $200, the trailing stop will only trigger a sale if the asset price drops below $180. This way, the trader will lock in most of the gains.
Using Trailing stop orders
The best way to see how effective such an order can be is to look at another trailing stop order example below.
You can use both technical analysis (chart patterns and previous price performance) and fundamental analysis (digging down into the balance sheet, profit and loss accounts, etc). After this, you decided to buy XYZ stock at $43. Having conducted your research and come to this conclusion to buy 1,000 coins at $43, with the intention of holding it for a few days or weeks.
After just a few days, the price of XYZ rises to $48. While you’re happy that your decision is right, you might get a little nervous because of such quickness of the rise.
But you still have that feeling that the asset price could continue to go up, and here you don’t want to miss the potential profit that the asset’s price firmness would give.
In order to protect the majority of your profit, and at the same time as benefiting from a further increase in the asset price, you could place a trailing stop order to sell 1,000 coins 2% below market.
What this means here is that if the asset price falls 2% from the market price, then a sell order would be executed for you, allowing taking the profit at that time and leaving you with no risk on the downside.
But it gets better.
Because the order is a trailing stop, then the 2% limit below the market price follows the highest price in the market throughout the time the trailing stop is executed.
When you placed the trailing stop, with the XYZ price at $48, and there is a fall to $47.04, it would have seen the sell order executed.
But if the asset price continues to rise, so does the sell limit price. For example, if the asset price hits $50 then the trailing stop limit is automatically increased to $49. But, if the asset price falls to $49, from a high of $50, then your XYZ assets will be sold at $49.
But if the price only falls to $49.20, your trailing stop order won’t be executed. If the asset price then moves up to, say $51, the trailing stop is then adjusted to $49.98. And, it continues.
So, the benefits of Trailing Stops are plentiful.
You don’t have to watch the trends continuously. You can enjoy the benefits from further increases in the asset price. And, you may protect yourself from a downtrend.
Buy trailing stop order
With a trailing buy order, the stop price follows or trails the lowest price of the crypto asset that a trader sets. If the asset price rises above its lowest price by the trail or more, it will trigger a buy market order. Then, the trader will buy the asset at the best available price.
A Trailing Stop Buy order sets the initial stop price at a fixed percentage above the market price as defined by the Trailing Amount. As the market price troughs, the sell stop price dips one-to-one with the market but always at the interval set initially by the trailing percentage amount. If the stock price rises, the stop price remains the same. When the stop price is hit, a market order is submitted.
You want to buy ABC, but you think it will fall in value. Now, you want to wait to buy the asset. You also think that if the price for ABC moves up by a defined amount, say 5%, it may even move higher. In order to help minimize the potential costs, you can set the trail to 5%. Here, your stop price will always remain 5% above the lowest price of ABC.
Say, ABC is trading at $110 per asset current. You stop price will start at $115.50, which is just 5% above the current market price for ABC.
- If the price of ABC stays between $110 and $115.50, the stop price will stay here at $115.50
- If the price of ABC falls to $100, the stop price will move to $105, 5% above the current market price
- And, if ABC rises to the stop price i.e. $105 or higher, it will trigger a buy order. And, ABC will be purchased at the best price available currently.
Assume that a trailing stop buy order is placed for XYZ coin with an offset value of 5% where the beginning trough price is $100.
Trailing Stop Sell
The trailing stop sell order is just the reverse of trailing stop buy order. In the sell trailing stop order, the stop price follows or trails the highest price of the stock by a trail set by you. If the price of a crypto asset falls below its highest price by the trail or more, your sell trailing stop order will become the sell market order and the asset will be sold at the best possible price.
Placing a trailing stop buy order at TrailingCrypto
TrailingCrypto is one of the best crypto trading terminals that allow its traders to place buy trailing orders and sell trailing orders to mitigate losses and increase profits. By following the below steps, you can place a trailing stop buy order at TrailingCrypto:
Steps to place Trailing Stop Buy Order
- Select Trailing Stop Buy order type.
- Select Base and Quote coin.
- E.g. Market: BTC/LTC
- Select the number of coins which you want to buy. You can also select the percentage option to specify relative coin total (base coin).
- E.g. 10 coins. (quantity could be in the fraction)
- Or select 10% of BTC.
- Enter the quote coin price at with you bought. If it is left blank, current market ask price will be used.
- E.g. 0.01516 BTC
- The offset is fixed percentage value above the current market (ask) price. Using this stop loss will always be reaming with an offset of x% above from the trough market. If the market will come down, stop loss value will also come down. If the market goes up the stop loss will not change.
- E.g. Offset = 3%
- While placing order Quote price of LTC was 0.01623.
- Assume market dips to value 0.01421 and then start rising. Since 0.01421 is the lowest price, so Stop value will be as 0.01421 * 1.03 = 0.01464.
- Now, whenever market hit price above 0.0146363, a market buy order will be placed.
One advantage of a trailing stop order is that it automatically moves the stop loss level without requiring a trader to reset it themselves. Traders can use trailing stops to ride trends that are in their favor, while exiting when a reversal sets in.
Trailing Stop Buy needs a better example explained and also an example and not reuse the trailing stop sell example.
Will soon fix it.
This example is just fine, as of now
Will improve the explanation.
However, there are a plethora of articles on google explaining trailing order great details. So, this article is written with the assumption that one knows how trailing order work. We only tried to explain how to place a trailing stop order.
I’m hearing you say, there’s so many *other* great articles, it excuses the shortcomings of this article?????
It is better to show simple graphics/picture of what happens for every type of trade. Visual is sometimes better understanding.
Good suggestion. We would try to include as many graphics as we can in article revisions.
Agree. 1 image=1000 words. Moreover, now you have “advanced” button, is good to know how will interact the values of “Lower Stop” or “Upper Stop” with the order.
I like your idea.
indeed I have the same issue
Would be a pro feature to have the lines on chart representing real time orders and limits like Bitmex
In our todo list. we will add soon.