What is a trailing stop? How is it useful in Forex trading?
The success in Forex trading is not only about developing a good entry point or developing an exit strategy, it is also about developing a risk management strategy. A risk management strategy is crucial to online trading success as it ensures that the investment of a trader does not go in vain due to sudden market upheavals. It has been observed that traders in all forms of trading, be it Forex or futures trading, often lose out on otherwise successful trades because they do not have an effective risk management strategy. By not planning for market swings, traders are likely to expose their positions to bad markets and face losses.
It is important to utilize effective stop-loss orders and ensure that the losses are kept to a minimum. However, going by simple stop-loss orders can reduce the profit margins as they might get triggered for a momentary drop in prices. This can be avoided by using a different kind of stop-loss order, one that pushes for more profits from the online trading market in Malaysia and still ensures that the position is safeguarded.
A trailing stop is an order which fixes the stop price at a predetermined amount. It is a highly aggressive mode of exiting a trade and brings the best returns to trading account. Prices in the market oscillate through the session. A trailing stop-loss order works in such a way that it always maintains a gap of few predetermined pips below the prevailing market price. This trailing amount raises the exit trigger when the position gains in momentum. This keeps the stop-loss order rising until the market rises without limiting the profits earned. However, when the market drops and touches the stop price, the order is immediately triggered, and the position is closed thereby arresting any further losses.
Using this style of an order helps Forex traders increase the profits they can make without exposing the trading accounts to market upheavals. Figuring out the optimum exit strategy helps traders deliver consistent profits while limiting their losses. For novices who are getting started with online trading in Malaysia, partnering with reputed brokers like WesternFX is crucial to delivering better profits.