How do I add a trailing stop to an open position?
When adding a trailing stop on an open position, there are three elements to take into consideration:
- Stop loss: This can be considered as a normal stop loss. When you add a trailing stop to an open position, your trailing stop is not active immediately. The market needs to move in your favor by the step distance + trailing step for the trailing stop to be activated. If the market moves far enough against you before your trailing stop is activated, your position will be closed if the market reaches this stop loss.
- Stop distance: This will be the distance between your trailing stop and the market level once your trailing stop is activated. The trailing stop will maintain this stop distance as it tracks the market.
- Trailing step: This is the number of pips the market needs to move in your favor above stop loss + - distance level for the trailing stop to be adjusted upward or downward, depending on whether you are going long or short.
When adding a trailing stop to a new position, its activation level is calculated as:
- Stop loss + stop distance + step distance (when long)
- Stop loss - stop distance - step distance (when short)
It is very important to remember that for a trailing stop to be added to an open position on our platform, the activation level must always be above the current market price when long, and below it when short.
Example:
Let’s suppose you are adding a trailing stop on a EURUSD long position.
You add a stop level at 1.17297, set your stop distance at 10 and your trailing step at 1.
1.17297 + 0.0010 + 0.0001 = 1.17407, the level at which your trailing stop will be activated once the market hits it.
1.17407 is above the 1.1737 which is the level max plus the pip minimum distance so your entry is accepted.
If the market moves in your favor to pass 1.17407, your trailing stop will be activated with your new stop level at 1.17307, maintaining the set stop distance of 10 pip. Every time the market moves 1 pip in your favor, your stop level will move to maintain that 10-point distance.
Please bear in mind that trailing stops are not guaranteed, and so can be subject to slippage. This means that they may not be executed exactly at the level you’ve specified.