Though there are unlimited variations to trading styles and strategies, there is one broad commonality that most traders, be they novices or veterans, share — trading one lot at a time. Trading multiple lots can be used as a risk management strategy. Here, we will show how to use Trailing-Stop orders as an alternative for trading multiple lots, to reduce risk and potentially gain more profit.
The market is in a trend. There is a great entry sign for a long position — a small cross of the 21-Smoothed-Moving-Average with bullish engulfing candlesticks. So you got in, and immediately placed a Stop-Loss order, maybe at the 50-SMA, maybe at the last swing. Great. Where do you target your Take-Profit?
You start riding and see a nice momentum buildup, you can surely put your Take-Profit order a little bit above the last high. That will be a nice scalping of 0.3% profit. Easy peasy. But why not ride this good uptrend up to the top?
Oh, of course, that is because we don’t know where the top is. But you can enter a Trailing-Stop order instead of your Take-Profit one, which will allow you to ride further on the trend. But by doing so, for example with a Callback-Rate of 0.2%, you can end up on breakeven in some cases.
What you can do is putting a Take-Profit order a little bit above the last high, but not for the entire position, maybe just for half of it or so. Now, when the market gets there — you already got something! That will remove the risks of ending with no profit, will give you a boost of confidence (you have a win!), and will allow you to keep riding the trend with the other half of your position. So we put a Trailing-Stop order of about 0.2% (the last gap between a high and a low was about 0.3%) to kick in a bit above the Take-Profit order. That will allow us to grab another 0.45% profit on the other half of the position. That is a total of 0.525% profit.
I tried it today on the above scenario. I got in position, let’s say of 1BTC in size, and entered a Take-Profit after 0.3% gain for half a BTC, and another order of Trailing-Stop for the rest of the position — another half a BTC.
That allowed me to score that gain for this position. It felt good. I didn’t scare myself off and took just the little one, and I did grab some profit from it so I was calm about that, and my Trailing-Stop wouldn’t have closed my position on breakeven.
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