<\/span><\/h2>\nTrailing stop losses are very useful in the forex market. They allow traders to automatically close their open positions when they move against them, but at a certain threshold or distance from where they opened their position.<\/p>\n
Trailing stops are not good for every trader because there is no one universally right way to use them – it depends on the trader’s strategy.<\/p>\n
The first step is to choose a currency pair, establish an account with at least $100 and open your first position by placing a BUY order of EUR\/USD. You should also specify that you want to use Trailing Stop Losses in the Orders section of your MetaTrader platform (MT).<\/p>\n
The next step is to choose the direction of your trade. You should also place a \u201cTrailing Stop Loss\u201d order below the last candlestick on the chart which means that you set your distance at $0,01 for each pip in the movement against you – just like standard stop loss orders.<\/p>\n
There are several factors that should be taken into account when deciding how to use Trailing Stop Loss orders. One of them is the currency pairs you are trading because each one trades differently which means their volatility levels vary as well.<\/p>\n
In most cases, traders set a distance between -0,01 and 0,20 pips for low volatility currencies such as USD\/CHF, GBP\/USD, AUD\/USD. But when trading more volatile currencies such as EURGBP or EURJPY they usually set a distance between -0,20 and +0,50 pips for each pip of movement against them.<\/p>\n
Another factor is the time frame you are using because most traders use them on time frames of one hour or more. You can also use Trailing Stop Losses with the M15 timeframe which is very popular among scalpers, but keep in mind that this setting implies higher risk so you should be careful when using it.<\/p>\n
A great way to determine how much distance your stop loss order should have from your entry point is to test different distances by using a demo account. Once you have found the distance that works best for your trading strategy, double this value and use it on your real money accounts which will protect against loss of capital in case something goes wrong with your trade setup.<\/p>\n
You can also choose where to set these orders – at the current price or at the average of recent prices. If your stop-loss order is set to \u201cCurrent price\u201d, it will be triggered once this value reaches $0,000001 which can lead to many false signals in low-volatility markets because most traders are using standard values for their stop orders (like -0,20 pips for example).<\/p>\n
If you want to avoid false signals, it is best to set your stop-loss order at the average price of recent prices. This means that if you are trading on a one hour chart and there was no movement in the market during this time frame, these orders will not be triggered until something happens – either by increasing or decreasing in price.<\/p>\n
You should also keep an eye on the liquidity of your currency pairs because if you are trading a very liquid pair such as EUR\/USD, it is unlikely that these orders will reach $0,000001 and trigger them due to low volatility – unless there was some big movement against you which would lead to a gap.<\/p>\n
The next important factor to consider is the time of day when you are trading because many traders experience a certain level of market exhaustion at this time which means that their orders will likely not reach $0,000001 and get triggered if they use standard stop loss values. For example, it would be advisable for EUR\/USD traders to use a distance of -0,30 pips while trading at night.<\/p>\n
Finally, you should also consider your entry point because this will help determine the direction in which these orders are set to move against you if they get triggered due to price movement. For example, EUR\/USD traders who have used an entry point of $18000 should set their stop-loss orders at a distance of -0,30 pips from this point because that is what they have been using as standard values.<\/p>\n