In futures trading, besides orders like Limit or OCO , Trailing Stop is one of the most popular orders among users. Besides supporting users to have a reasonable entry point, Trailing Stop also brings many benefits to traders. So what is a Trailing Stop order? Let's find out with Coin68 through the article below.
What is Trailing Stop? How to use Trailing Stop order on Binance
What is Trailing Stop?
Trailing Stop is an order that helps users limit losses and preserve profits when the market fluctuates strongly. However, to use this order effectively, users need to set a percentage between the desired price and the market price in advance.
When using the Trailing Stop order, users need to note the following 2 characteristics of this order to optimize the trading experience:
When the market price moves against the user's order, the Trailing Stop will automatically convert to a Market order and close the order at the market price. This only happens when the difference between the user's pre-set price and the market price has reached a certain percentage.
Conversely, when the market price moves in a favorable direction, the Trailing Stop will follow and maintain the percentage instead of closing the user's order. This allows the user to maintain the order as well as reap additional profits until the market reverses.
How Trailing Stop Works
To use the Trailing Stop command effectively, users can use the following 2 ways to optimize the functionality of this command. To understand the operations of Trailing Stop in percentage or constant, we will go through the 2 examples below.
When a user places a Trailing Stop order to sell an asset 10% below the market price and the Market price of the asset is $200, there will be 3 cases:
If the price increases to $400 and then decreases by 10% to $360, the Trailing Stop order will automatically convert to a Market order to sell the asset at $360.
If the price rises to $250 and falls 5%, the Trailing Stop order will not be triggered because it will only be executed when the price falls to the 10% mark.
If the market price drops 10% from $200 to $180, the Trailing Stop order will automatically convert to a Market order and be triggered immediately.
When a user places a Trailing Stop order to sell an asset 30 USD below the market price and the Market price of the asset is 200 USD, there will be 2 cases:
If the price increases to $400 and decreases by $30 to $370, the Trailing Stop order will automatically convert to a Market order to sell the asset at that moment.
If the price increases to 250 USD and decreases to 240 USD, the Trailing Stop order will not be triggered because the previously set constant is 30 USD and the above decrease does not satisfy the condition.
How to use Trailing Stop order on Binance
- Step 1: Access Binance .
- Step 2: Select the Futures tab and then USD@-M Futures .
- Step 3: Find the coin/ Token that the user wants to Longing/ Short.
- Step 4: Select Trailing Stop .
- Step 5: Select Callback Rate (the difference rate that the user wants), trigger price (the price that the user wants to place the order) and finally the order size .
Besides using Trailing Stop order in Futures, users can use this order in Spot Trading to get a better entry.
Summary
Above is all the information about Trailing Stop and the features that this order is providing to the market. Through the article, Coin68 hopes to bring readers the most general information about Trailing Stop as well as how to operate and use this order in trading.
Note: Coin68 is not responsible for any of your investment decisions. Wish you success and earn lots of profit from this potential market!
