What is a Trailing sell?
A trailing stop is a variation of a standard stop order. It is a conditional order that uses a trailing function rather than following a fixed stop price. The trailing amount can be set in either points or percentages and follows the asset price when it is moving up (for sell orders) or down (for buy orders).
The trailing order remains in force until the price passes the specified number of points or changes within a specified percentage range. Once the preset conditions are met, the trailing buy or trailing sell becomes a market order and is executed.
When using a percentage as a trailing amount, do not forget that this value is not constant. The actual point spread between the current price and the trigger price varies because the trigger price is recalculated constantly.
- For sell orders, the trigger price will widen when the asset price moves up because the percentage will be recalculated based on a new, higher price.
- For buy orders, the trigger price will narrow when the asset price moves down because the percentage will be recalculated based on a new, lower price.
A trailing sell order helps to maximize the profit when the asset price rises. The aim of this order is to sell when:
- The asset price reaches or rises above the price you have set for trailing
- The asset price drops to the level or above that you have set for a trail stop value
For example, you have a coin that is traded at 4$, and its price is growing. You can create a Trailing Sell with a trail price of $4.30, and the trail end value of $0.10. When the coin price reaches $4.20 or higher, a market order will be placed to sell the coin. If the coin reaches the value of $5 and then, immediately drops below $0.10, your order will be executed to sell your coins at the highest price.
The aim of a trailing buy order is to buy when:
- The asset price falls to or below the trail price
- The asset price grows to the level or above the trail stop value you have set
For example, you are watching a coin that is being traded at $3.10, and its price is declining. Then, you can create a Tailing Buy order with a trail start price of $2.90, and an end value of $0.10.
If the asset price drops to $2.90 or below, a market order will be placed to buy the coin.