Now if the price keeps moving up, your stop loss with also keep moving up and you will be able to make maximum profit by riding the trend. Your initial stop loss was set as Rs 97, but since you are using trailing the stop loss, as the price moves by 5 points, your stop loss moves up by 5 points and is now Rs 102. Let’s say that you have bought stock in company ABC at Rs 100, now the trade goes in your direction and the price is currently at Rs 105. The concept of trailing stop loss can be better understood by an example
This is how the trailing stop loss works. If you have set trailing stop loss as Rs 5, then a move of Rs 5 in the stock will lead to a change of Rs 5 in your stop loss. So if the stock moves in your desired direction by Rs 4 and then reverses, there will be no change in the value of your stop loss. If your trailing stop loss is Rs 1 then a move of Rs 1 in the stock will lead to a change of Rs 1 in your stop loss. You must note that the minimum trailing stop loss you can set for trading in Indian Stock Market is 20 ticks that is Rs 1. So the profit is protected (remember its protected not limited) and the loss is also limited. In this way, your trade, as well as the risk, is managed by a trailing stop loss. As soon as the price moves up, the stop loss moves up by the desired amount, nothing happens when the stock moves down. If you have an open long position the trailing stop is set at a predefined distance from the stocks current market price in the case of a long position the stock price is placed at a fixed distance below the market price. The difference is realized when the trade moves in your desired direction. Initially, the trailing stop loss is just the same as the regular stop loss. It allows you to secure profits too while securing profit it doesn’t place a limit on potential profits while securing profit you are at the same time setting a limit on potential loss in this way you can ride a trend while having an effective exit strategy in place. There are three main benefits of using a trailing stop loss. The trailing stop is not generally used as an entry order but rather when you already have an open favorable position which is accumulating profit.
Trailing stop loss is similar to the regular stop loss however it has a trailing amount attached to it.Ī trailing stop loss order is very effective at managing risk and optimizing profits.
0 kommentar(er)
