You have probably heard about having a trading plan when trading cryptocurrency if you are planning to invest in it. Nevertheless, it is critical that you limit your losses and lock in a profit per trade. To minimize risks and reduce losses in the event they occur, you must learn to use the trailing stop order. Provided by tokenscope.com
What Is a Trailing Stop Order?
A trailing stop order is a type of preset order that manages and reduces risks by specifying the point or percentage below the asset’s current market price at which the trade should be closed as the market swings against it. Given the volatility of cryptocurrency, you must learn to reduce risks and losses to protect your investment.
A trailing stop order sets a percentage below the market price, not a single value. The order trails behind the cryptocurrency’s price as it moves to ensure that the trade does not result in losses greater than preset by the trader. The trailing stop-loss order remains effective until the trade is liquidated or canceled.
A stop-loss order assists the trader in protecting and locking in profit when the market moves in a favorable direction, in addition to reducing loss. It keeps the trade open and profitable as long as the market is moving in a direction that favors the trader.
How Does a Trailing Stop Order Work?
A trailing stop takes note of the original price and trails the movements of the price, calculating the percentage away from the original price until it reaches the percentage set by the trader. Once the negative movement reaches the percentage set by the trader, the trade will be closed automatically by the trailing stop order.
Traders can benefit from using trailing stop orders when trading highly volatile cryptocurrencies. The erratic nature of the price of a cryptocurrency is best managed by setting a trailing stop order, as it prevents losing more than a precalculated loss.
The Importance of Trailing Stop Order to Crypto Investments
To protect your trade from massive losses that can wipe out your balance or trade, use a trailing stop loss. If you want to keep a buy trade open for a long time, make sure to place a trailing stop below the current market price. And for short-term selling trades, place your trailing stop above the current market price.
One of the ways to protect and grow your crypto investment is to use a trailing stop. It helps reduce losses and lock in profit. Ensure to use trailing stops in addition to other strategies to maximize your returns.
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