People's living conditions can be said to be relatively abundant now. Many people have begun to carry out some financial investment projects. Foreign exchange is the most popular project in recent years, but do you know foreign exchange? Learn how do you deal with "trailing stop loss" in foreign exchange transactions? Today, Ig Jun will take you to understand trailing stop loss.

What is a trailing stop loss?

Trailing stop loss is also called trailing stop loss or trailing stop loss. Only when the exchange rate changes in the direction of a favorable position, a stop loss of a certain number of points will be triggered, which is consistent with the latest price. Trailing stop loss is an order. Its primary function is to automatically maintain open positions and automatically change the stop loss level according to price changes.

What is the principle of trailing stop loss?

The trader opens an extended position and sets the number of points between the current price and the trailing stop loss.
If the price rises, the trailing stop loss will automatically rise to maintain the set spread.
If the price falls, the trailing stop loss remains the same.
In this way, traders do not need to consider the level of profit and have the opportunity to use the trailing stop loss to get the maximum profit when the price rises. Not only that, but the moving stop also limits the loss.

For example, a trader opens a position at 1.3400 and sets a trailing stop loss at the bottom 50, 1.3350. If the price rises and exceeds the marked 1.3400, the trailing stop loss will automatically follow and maintain a 50-point gap from the current price. In other words, if the price reaches 1370, the trailing stop loss will become 1320.

If the price falls, stop moving the stop loss position. If you want to open a sell position, the trailing stop is the opposite. Traders set it at multiple points above the price. The price drop causes the stop loss to move according to the specified number of issues. The price rises, and the stop loss is fixed.

When traders use stop-loss orders in foreign exchange transactions, they must manually change them as their trading profits increase. Trailing stop loss will automatically set the stop loss level according to the value required by the trader.

Trailing stop losses are mainly used by trend traders, but they cannot track price changes. Intraday trading should also use a trailing stop loss when you need to react quickly to price changes.

It is worth remembering that the mobile device will only stop working when the trading terminal is active. When the trading terminal is closed, the stop loss will be fixed at the current level.

The difference between stop loss and trailing stop loss

Stop loss is to set a fixed price to sell.
Trailing stop loss is when the stock price falls below a particular moving average to sell. Since the moving average changes, it is called a trailing stop loss.