Trailing Stop Loss Orders

The trailing sell and buy feature explained

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Written by gsmg-jrkbgrt
Updated over a week ago

Trailing stop loss market feature

The "Trailing Stop" feature attempts to "lock-in" profit and to keep locking in more as the market keeps moving in your favour.

This explanation goes for both the buying and selling side. To illustrate how it works, we provide here an example of a trailing sell:

  • If the trailing sell feature is enabled, the trade engine will place all new sell orders a couple of per cent higher than "normal". With "normal" being the price where it "normally" would have been given your configured minimum trade percentage.

  • If the market price has risen to above the "normal" price plus a small amount (usually 0.1%), then the higher-up limit order is replaced by a stop-loss limit order at the "normal" price.

  • If the market keeps moving in your favour, then the stop loss limit order will be "lifted" as much as possible, keeping some distance to it (usually 0.1-1%) as "wiggle space". This is the "trailing" part of it all.

  • If the market keeps moving in your favour and the current market price exceeds the "normal" prices of any other open higher-up limit orders, then these will be cancelled and their quantities will be added to the trailing stop loss limit order.

About risks:

  • There is some loss in efficiency as the minimum trade price is effectively increased by a small amount.

  • There is also some efficiency loss because the code may be just too late to place the limit order and the market has moved already to your disadvantage. This is particularly true for trailing buy orders.

  • In rare cases, the market price just "skips over" the stop loss limit order too fast for it to be triggered and the limit order cannot be executed.

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