What is a trailing step? – Find all the relevant information

Have you ever wanted to invest your money more seriously in something like Forex, blockchain, or something like that related to finance? Want to know all the “little secrets” of great masters from people who are successful in their work? If your answer is yes then you found the right spot! In this article, you will learn what is a trailing step, trailing stop order, and all the information you need about trailing step vs trailing stop.

Before we finally give you all the detailed information about what the trailing step is, you must be aware that market movements are daily and frequent. So, it is always imperative to keep up with current events that will improve your trading results.

And now, let’s find out what is actually a trailing step and what you need to understand and keep in mind when it comes to that.

Trailing step definition and explanation by professionals

A trailing step refers to a measure of price movement and is a vital component of a trailing stop order. It represents a type of stop-loss order that follows your position in case it earns you some profit and closes in case the market moves against you.

Keep in mind that the value of a trailing step is pips. Pip is a measurement of movement in foreign exchange trading. It defines the change in value between two different currencies. In literal terms, pips are “point in percentages.” It’s the minor standardised move that one particular currency quote is able to change by.

Therefore, a trailing step of, let’s say, 50 pips can only move after 50 points of movement in the asset’s price.

A trailing step as one of the critical parameters

The trailing step represents one of the crucial parameters you set to manage precisely how your trailing stop-loss follows the price on the market. It imposes precisely how much the underlying market is required to move before the re-adjustment of your trailing stop.

Remember, the larger your trailing step is, the more the market needs to move before the re-positioning for your stop, and with much less frequency, the “trailing” will be performed.

How can you set a trailing stop exactly?

In order to set a trailing stop, you’ll have to put a trailing stop via the deal ticket just like you are placing a regular stop. Don’t forget when setting a trailing stop. It’s crucial to set the stop distance as the trailing step and a regular stop.

Once again, a trailing step refers to a number of points that the market requires to move in your favour right before the trailing stop tends to move with it. Now that you’ve understood this concept, here is how you can add a trailing stop on the deal ticket. You can click on the drop-down menu under the tab “stop.” After that, select “trailing.”

A brief example of a trailing stop

Here is one example of a trailing stop. Suppose you are eager to open a long position on the FTSE 100, currently trading at 7400. Therefore, you’ll decide to set a trailing stop 100 points away from the current market price at 7300. Then you will develop a trailing step of 50 pips. It all means that the market can move 50 points before the stop adjustment.

So, the FTSE will increase in value up to the incredible amount of 7450. Your trailing step indicates that it’s required for your stop loss to move to a much higher level. Remember that your stop-loss will be positioned at 7350 because your step amount is set to 50 pips.

If the FTSE increases by an additional 50 points, t’s clear that your stop-loss will adjust to the breakeven point. If you see the FTSE rose by the same amount once again, your trailing stop will move up at 7450, which are positive 50 points. On the other hand, if the FTSE happens to decline in price, falling back to the amount of 7400, it’s evident that your trailing stop would close your position at 7450, and you’ll still be able to make a profit.

Trailing step vs trailing stop – get all the essential information.

In case you were thinking about what is the difference between trailing step and trailing stop, here’s what you need to know:

A trailing step works in conjunction with a trailing stop. It’s also known that trailing stops usually use different methods for movement. For example, these can be a moving average, a static number, fractals, or case steps based on pip gains.

The step indicates the stop when it is the right time to move up. Therefore, if you have a step at 50 pips, once your trade is profitable at 50 pips, it’s expected from your step to dictate the stop to move up in order to break even. Once you hit 100 positive pips, the step will kick in and move your stop to 50+, etc.

In conclusion, let’s say you have a static number stop at 50 pips. Right when your trade hits 50 pips positive, the stop will move to B/E. In case it goes to 55 pips positive, your stop will move to +5. If it goes to 63 pips positive, your stop will trail to +13, and so on. Remember that it will keep that 50 pip from the latest high point.

Summary of the trailing step vs trailing stop

Let’s go over everything we have learned about the trailing step and stop so far in this text. These are crucial things you must never forget:

• A trailing step is a measurement of the price movement. It is a vital component of the famous trailing stop order. This step is known as a particular type of stop-loss order that follows your position if it provides you with sure profits. On the other hand, it simply closes if the market moves against you.
• A trailing stop represents a stop that automatically adjusts to market movement. So, it will follow your position once the market moves as you wish, lock in all of your profits, and then close the position if the market doesn’t work in your favour.