How to Determine Trailing Stops for a Perfect Forex System
Do you know what trailing stop is? This term is known as a tool that refers to MT4, the point is to do a stop loss automatically. Although its function is to keep profits safe, but the use of trailing stops can still lead to pros and cons that generate debate. How can it be like that? Because trailing top can only be effective when used in the trending market. If forced on sideways conditions, trailing stops may increase the risk of a faster stop loss. Furthermore, if you want to determine the trailing stop, it can’t be done carelessly. Because even if it has been implemented in market trending, the use of trailing stops can be triggered faster due to the volatile corrective movement (reversed movement).
Problems that usually cause the Trailing Stop Dilemma syndrome, due to confusion of trailing stop settings. Should it be 15 points, 20 points, or have to wait until there is a confirmation of the trend forwarding by the indicator signal.
How to Determine the Best Trailing Stop
You can specify trailing stops based on the choice of strategy, risk management or volatility. When referring to the strategy, you should look at the confirmation of the forwarding trend. But if you pay attention to its volatility, you can use a measurement indicator. You should also note that the trailing stop can only work automatically when the trading platform is online. So if the MT4 has been closed and cannot be operated again, the trailing stop can become inactive and cannot perform its function. Here’s how to determine the trailing stop:
USING THE SWING POINT
Trailing stops are one of the ways that can be done without the help of indicators with quite easy. Basically continuing the use of trailing stops on market trending, stop loss will be better shifted when there is a price movement that has confirmed the trend forwarding. In other words, you can use the swing point which is the turning point of the correction wave.
To determine the trailing stop, use the swing point, although a price reduction can show a significant downtrend, but there will be a correction that stops after the high price fails when it hits the previous swing high level. This can be used as a trailing stop position. You can try placing the trailing stop a few pips above the swing point.
While in the uptrend, it can look for a swing point in the low price section. This method is used to ensure that the successor of the uptrend has been confirmed by a lower price higher than the previous low. So for placement, you can take a pips below the swing point.
USING the MA Indicator (MOVING AVERAGE)
When going to determine the trailing stop using the MA indicator, the basic thing that must be done is actually not so different when looking for a swing point.However, the use of the MA method is slightly more selective because it only uses the indicator line test swing point. In other words, the signal that continues the trend can be more confirmed. The parameters and type of MA in this condition can be adjusted using the preferences of each trader.
DETECTING PARABOLIC SAR SIGNALS
Other indicators that can be used to determine the trailing stop are Parabolic SAR. Parabolic signals are known to be used to find out where the entry points and exit points are. Because it can help give a sign of changes in the direction of the trend. However, not so many traders know that this indicator signal point can be used as a determinant of trailing stops.
You simply use Parabolic SAR signals to guide you in determining the ideal trailing stop position. Because this indicator signal can be formed after the price is closed, then this signal can be an informant to continue a reliable trend if as long as the indicator point is still in the same position with the direction of entry.
When the price trend moves quickly, the Parabolic SAR indicator can be used as well as the Moving Average. When the price has finished correcting and returning to the main trend position, the Parabolic point will return to the starting position.This is used to recommend trailing stops.
USING AVERAGE TRUE RANGE
ATR or Average True Range is an indicator of volatility that clearly can be a value indicator for price changes over time. If you enter a trader who wants flexibility and can also enter in all market conditions, you are advised to use the Average True Range indicator.
In general, the rules for determining stop loss can change according to the state of volatility. When volatility is high, it is quite dangerous if the stop loss is placed at a narrow distance at the entry level. It’s just that, when the price volatility is low, you can stop stop position close to the entry level.
Average True Range can be a pointer to recommending a stop loss of value. If the ATR value is currently 0.0037, then you might consider the stop loss distance at 37 pips. It’s just that the ATR value will increase to 0.0100. This figure is considered unsafe if the stop loss is left to have a distance of 37 pips from the entry level.
When the price continues the trend and you want to set a profit by activating the trailing stop, you must pay attention to the value of the ATR. If it is still in the same consistent position as when you open the position, then you can move the trailing stop and adjust it to the previous distance. However, if there is a significant change in the ATR value, it’s a good idea to consider and adjust the trailing stop distance and adjust it to the latest ATR value.
Determining the trailing stop with risk management, it can be said is the simplest and easiest thing. The principle is not too complicated, you just need to move the stop loss to the breakeven level when the price has reached the first profit target.When prices continue to continue the trend and go to the next target, you can slide the stop loss towards the first target. That way, you can set a profit or can also secure a position when there is a loss, if the price suddenly goes in the direction that reverses.
This method can be used with an automatic trailing stop . If your profit target is 30 pips at the entry level, then you can make settings on the trailing stop with 30 points within the Meta Trader.
That is some simple way to determine trailing stops. The method for determining trailing stops on the first to the fourth method can be done manually. The stop loss shift in this way is a reactive step and can be determined after the indicator signal appears. Or after the price is finished with the correction and back to the main trend.