Trailing Stop is an effective profit protection strategy for traders

Trailing stop is an advanced order mechanism designed to help you secure profits while allowing your position to grow in line with market momentum. Unlike a regular stop loss that remains fixed at a single point, this type of order automatically “follows” the price movement in a favorable direction for the trader. It is especially useful when your trade is going as expected, but you cannot monitor the screen 24/7 or are unsure about setting a specific exit level.

This order features flexible activation price, allowing you to set when the system begins tracking market movements. This way, you have full control over when automatic protection starts working.

Two Variants of Trailing Stop: Percentage and Fixed Distance

Trailing stop offers two different ways to set your protection level:

Percentage-Based Type With this variant, you set the percentage the price can fall from the peak before triggering a sale. For example, if an asset is bought at $100 and you set a 10% trailing stop below the market value:

• Price drops directly from $100 to $90 (a 10% decline) → order is triggered and converted into a market sell order
• Price jumps to $150, then drops 7% to $140 → order is not triggered because 10% of $150 is $135, which has not been reached
• Price continues rising to $200, then drops 10% to $180 → order is triggered because $180 is 10% below the last peak

Fixed Distance Type This variant uses a fixed dollar or rupiah amount, not a percentage. For example, at $100 with a $30 trailing stop:

• Price falls from $100 to $70 (a $30 drop exactly) → order executes and sells at market price
• Price reaches $150, then drops $20 to $130 → not triggered because the $30 distance from $150 is $120, not yet reached
• Price rises to $200, then drops $30 to $170 → order is triggered and automatically sells

How Trailing Stop Works When Price Moves Favorably

The main advantage is that when the price moves in your favor, the stop loss level also “moves up” following the momentum. You don’t need to constantly adjust the level; the system does it for you.

Imagine the price continues to rise from $100 to $150, $200, even $300. Your trailing stop will follow each increase, ensuring your secured profits are protected. When the momentum reverses and the price starts to fall, the order immediately locks in the profit at the predetermined level.

Important Points to Consider Before Using Trailing Stop

Margin and Positions Remain Unfrozen A crucial point: your position and margin remain active until the trailing stop order is truly triggered. Make sure you always have enough margin to keep your position stable. If your margin runs out before the stop is triggered, your position could be liquidated first.

Order May Not Be Triggered There are scenarios where the trailing stop might fail to trigger:

• Price restrictions on the platform
• Limitations on the number of positions
• Insufficient margin when the price drops
• Market status is non-trading
• System technical issues

Even after being triggered, the resulting market order is not guaranteed to be executed 100%. Unfilled orders will appear in your Open Orders section.

Better Risk Control While there are risks, trailing stops provide peace of mind. You can sleep soundly knowing your profits are protected and losses are limited, without having to monitor every price tick throughout the day.