Trailing stop-loss
 

Have many of the same properties as a stop-loss. The difference here is that you can choose what percentage the price should rise or fall for the order to be activated. To activate a trailing SL, you need to set some parameters:

 

Trigger terms/price = here you chose what percentage rise or fall the stock/instrument must have to activate the order. It is important to note that this trigger condition is calculated from the highest or lowest

trade in the stock after the order has been placed. That is the top listing/bottom listing.

Price = here you select a price that indicates a percentage deviation from the trigger course that you tolerate and accept that may occur. It is this pice order that will be sent to the market. It is important to note that there must be a buyer or seller at the price you have stated, for the trade to go through. It is therefore more likely that the trade will go through if you allow a larger price deviation from the trigger price.

Let's take an example

Phil has bought shares in "Texa" which he wants to sell if the stock price falls by 10%. He then places a trailing SL order with a price deviation of 3%, to be sure that the trade goes through.

"Texa's" share price opens at 100$ and rises to 110$ during the day. It then falls down again and in the event of a 10% decrease (99$), Phil's sales order enters the market and to the order book. Since Phil has entered an acceptable deviation of 3%, he will sell his shares at 99$ - 3% = 96.03$ a piece.

 

It is important to know that a trailing stop-loss is not 100% safe. There may be cases of excessive price fluctuations, which can have price passing the trailing SL trigger without it being activated. There may also be technical errors, changes in the company's share capital, gap-opens, or the like, which may lead the order to not go through.

 

It is therefore always important to keep an eye when the price of an instrument you own is approaching a stop-loss level. Trading stocks that are very liquid can prevent such gaps and fluctuations to occur, and help the trailing SL order be more reliable.

trailing stop-loss secure in the market with trailing stop-loss stop-loss hedging

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