Trailing stop loss is the most effective way for investors to control foreign exchange trading risks and prevent profit-taking. All investors should learn to set trailing stop loss. So, how to set a trailing stop loss?
The setting of trailing stop loss is actually not complicated. There are three types of trailing stop loss. Investors can set the trailing stop loss correctly after understanding.
The first type, fixed moving stop loss
Fixed trailing stop loss is the most common and most used trailing stop loss setting method used by investors. Fixed moving stop loss is mainly based on the closing price of the previous trading day to set the stop loss price. When the exchange rate rises, the stop loss price rises accordingly. If the exchange rate reverses and falls below the trailing stop loss price, the order can automatically stop the loss. Fixed moving stop loss is more suitable for unilateral markets with strong fundamentals.
The second, dynamic trailing stop loss
The dynamic trailing stop loss is mainly used to set the trailing stop loss by reference to the corresponding moving average deterioration of the frequency band of the Bollinger Bands. When the exchange rate is rising or falling, the price of the trailing stop loss will also rise or fall accordingly. Dynamic trailing stop loss is the most flexible trailing stop loss setting method, suitable for all foreign exchange market conditions.
Third, yesterday’s lowest point moving stop loss
Yesterday’s lowest point trailing stop loss, as the name suggests, refers to the lowest point of yesterday’s exchange rate to set a trailing stop loss. This kind of trailing stop loss method is mainly suitable for foreign exchange currencies with large fluctuation frequency and high amplitude. When the stock price rises or falls, investors can set the stop loss price through yesterday’s highest or lowest point, and then wait for the exchange rate to continue to fluctuate.
The above are the three common modes of trailing stop loss. I believe that through the above introduction, investors have a simple understanding of the issue of “how to set trailing stop loss”.