In case a trader has entered into a long position, as the value of a currency pair received support at the moving average, he/she could adjust the stop loss under the moving average as the trade develops. It is also possible to adjust trailing stops manually with the help of technical indicators such as moving averages, channels or trend lines. If the stop is placed within a distance too far from the current market price, if triggered, this could cause the trader to leave too much money on the table. If the stop is placed within a distance too close to the current market price, the trade would be stopped before it has a chance to develop. Therefore, it is important to set the trailing stop percentage at a level that is neither too tight, nor too wide. Have in mind that if the pair has recorded a drop of, say 0.55% that same day, the trailing stop would not have been triggered, because it has been set to 1.50%. This 1.50% decrease would trigger the trailing stop and assuming the order was executed at 104.40, the trader would lock-in 40 pips of profit. Over the next few trading sessions, USD/JPY appreciates further, reaching 106.00, but then suddenly tumbles 1.50% within a single trading day to 104.40. The trader may decide to tighten the trailing stop to 1.50%, allowing his/her trading position more room to run. As his/her trailing stop remains in place, if the currency pair declines 2% or more, say within the next week, the trailing stop will be triggered. The trader is obviously enjoying the profit he has registered for the moment, but expresses concerns that the pair may retrace its gains. Over the next month the pair increases in value, reaching 105.50, thus gaining 1.44%. This means that if USD/JPY declines by 2% or even more, the trailing stop order will be triggered, limiting losses. A trader decides to go long the USD/JPY pair with 5 000 units at 104.00 and sets a 2% trailing stop order (or Good Til Cancelled order) to secure his/her position. If the value of the currency pair suddenly changes its direction and moves by a specified percentage, the trade will be closed, limiting losses. This stop is usually used in order to secure what has been gained by enabling the trade to remain open and continue gaining as long as the value of the currency pair is moving in the right direction (depending on the position an investor has taken). In case an investor decides to enter into a short position, the trailing stop needs to be set above the currency pairs current market value. In case an investor enters into a long position, the trailing stop needs to be set below the currency pairs current market value. A trailing stop can be set at a defined percentage away from a currency pairs current market value.
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