Trailing Stop Differences

What is the difference between a Fixed Trailing Stop and a Dynamic Trailing stop?

Trailing Stops are designed to create a stop that will follow the market direction if in favor of the trade to lock in profit captured.

There are two types of trailing stops, Fixed or Dynamic.

Fixed Trailing Stop

A Fixed Trailing Stop is designed to follow your trade in increments of captured pips.

When setting a Fixed Trailing Stop a pip value must be assigned. This pip value assigns the number of pips that the market must move in favor of the trade before the trailing stop adjusts to the new stop position.

Example: A Fixed Trailing Stop with an assigned value of 20 pips will move in favor of the market by increments of 20 pips. The stop will remain in initial position until the market has moved in favor of the order 20 pips from the entry point and every additional 20 pips it will continue to move in favor of the market as long as the market is gaining profit. The Fixed Trailing stop will never move in an unfavorable direction of the order.

Dynamic Trailing Stop

A Dynamic Trailing Stop is designed to move pip for pip in favor of the order as long as the market is moving in favor of the trade.

Example: A Dynamic Trailing stop performs the exact same way as a Fixed Trailing stop but instead of moving in increments of a modifiable assigned pip value the Dynamic Trailing Stop is assigned a pip value of 1 and only moves the position of the stop when the order is moving in favor of the order. Every pip gained in favor of the order the stop will move that same pip value in favor of the market. The Dynamic Trailing stop will never move in an unfavorable direction of the order.

 

For more information, please see:

Help Article - SmartTrader: How to place a Trailing Stop

Video - UCS Best Practices: Pending Orders and Trailing Stops

 


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