** 𝗪𝗵𝗮𝘁 𝗶𝘀 𝘁𝗿𝗮𝗶𝗹𝗶𝗻𝗴 𝘀𝘁𝗼𝗽 ? 𝗛𝗼𝘄 𝘁𝗼 𝘂𝘀𝗲 ? **
A trailing stop is a dynamic stop-loss order that automatically adjusts as the market price moves in favor of your trade.
It is designed to protect profits by maintaining a certain percentage or point distance from the current market price.
Let’s go through examples for both long and short Bitcoin trades with a trailing stop set at a 2% ratio:
**𝑳𝒐𝒏𝒈 𝑩𝒊𝒕𝒄𝒐𝒊𝒏 𝑻𝒓𝒂𝒅𝒆 𝑬𝒙𝒂𝒎𝒑𝒍𝒆: **
Initial Trade: You buy Bitcoin at $40,000 per coin
Setting Trailing Stop: You set a trailing stop at 2% below the current market price.
Market Movement: Bitcoin’s price increases to $42,000 per coin.
Trailing Stop Adjustment: The trailing stop is now triggered at $41,160 (2% below $42,000).
Protection of Profits: If the Bitcoin price drops to $41,160 or below, your trailing stop order becomes a market sell order, helping you secure profits.
**𝑺𝒉𝒐𝒓𝒕 𝑩𝒊𝒕𝒄𝒐𝒊𝒏 𝑻𝒓𝒂𝒅𝒆 𝑬𝒙𝒂𝒎𝒑𝒍𝒆: **
Initial Trade: You short-sell Bitcoin at $50,000 per coin.
Setting Trailing Stop: You set a trailing stop at 2% above the current market price.
Market Movement: Bitcoin’s price decreases to $48,500 per coin.
Trailing Stop Adjustment: The trailing stop is now triggered at $49,470 (2% above $48,500).
Protection of Profits: If the Bitcoin price rises to $49,470 or above, your trailing stop order becomes a market buy-to-cover order, helping you lock in profits from the short position.
In both cases, the 2% trailing stop ratio is applied to the respective entry prices for Bitcoin.
This ratio provides a consistent approach to risk management, allowing for flexibility in the volatile cryptocurrency market.
As always, it’s essential to adapt your trading strategy based on market conditions and consider your risk tolerance when setting trailing stops or any other risk management tools.
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