The Trailing Stop feature allows traders to place a Stop Loss Order which automatically updates to lock in profits as the market moves in the trader’s favour. Trailing Stops can be placed by clicking the 'Advanced' button when creating a 'Market Order'.
There are four ways to enter a Stop Loss Order:
1. You enter a Trailing Stop Price. For example, if your stock is selling at $40 per share, you might enter a Trailing Stop Loss Order at $37.50 per share.
2. You enter a Maximum Loss Amount. Plus500 will then calculate the relevant Trailing Stop.
3. You enter the distance in Pips from the current price. Plus500 will then calculate the relevant Stop Loss price.
4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.
2. You enter a Maximum Loss Amount. Plus500 will then calculate the relevant Trailing Stop.
3. You enter the distance in Pips from the current price. Plus500 will then calculate the relevant Stop Loss price.
4. You enter a percentage from the current price. Plus500 will then calculate the relevant Stop Loss price.
Example of a Trailing Stop:
12.50pm Yahoo is trading at $45.51/$45.73 (Sell/Buy)
12.50pm You enter a market order with Trailing Stop of 50 pips = $0.5 = (-1.1%) to buy 100 Yahoo shares
You buy 100 Yahoo shares at $45.73
12.50pm You enter a market order with Trailing Stop of 50 pips = $0.5 = (-1.1%) to buy 100 Yahoo shares
You buy 100 Yahoo shares at $45.73
Therefore, the initial stop loss will kick in when Yahoo sells at $45.01. ($45.51 – $0.5)
2.05pm Yahoo prices start to quickly rise and reach $47.60 (the new Stop Price changes to $47.10)
3.10pm Yahoo prices continue to rise and reach $49.75 (the new Stop Price changes to $49.25)
4.15pm Yahoo prices start to dive quickly and reach $42.51. As you had a Stop Price set at $49.25, Plus500 executed the Stop Loss at this figure. Stop Loss Executed.
Profit Summary: 100* ($49.25–$45.73) = $352. (If you had not set a Trailing Stop, and only had a Stop Loss, you would have sustained a large loss.)
2.05pm Yahoo prices start to quickly rise and reach $47.60 (the new Stop Price changes to $47.10)
3.10pm Yahoo prices continue to rise and reach $49.75 (the new Stop Price changes to $49.25)
4.15pm Yahoo prices start to dive quickly and reach $42.51. As you had a Stop Price set at $49.25, Plus500 executed the Stop Loss at this figure. Stop Loss Executed.
Profit Summary: 100* ($49.25–$45.73) = $352. (If you had not set a Trailing Stop, and only had a Stop Loss, you would have sustained a large loss.)
Source : Plus500.com
