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Trailing Stop Orders in Crypto Trading – Instructions for use from GoodCrypto

Trailing Stop Orders are rightfully considered one of the best tools for cryptocurrency trading. Once you master Trailing Stop Orders, you’ll become a much more effective crypto trader – and your P&L will thank you!

Whether you want to enter a position or close an existing position, Trailing Stop Orders will help you place a buy order exactly when the downtrend reverses and sell only after the uptrend begins to “run out”.

Even though Trailing Stop Orders are available in traditional financial markets on most popular trading platforms – from Thinkorswim to Robinhood – Trailing Stop Orders are still very rare in crypto trading. Currently, only four spot (Bitfinex, Bitstamp, OKEx and Liquid) and three derivative crypto exchanges (Bitmex, Binance Futures and FTX) support Trailing Stop Market orders. NONE of the crypto exchanges support Trailing Stop Limit orders. Don’t try to find Trailing Stops not only on Exmo or YoBit, but also on Binance with Huobi – they are not there.

We, at Good Crypto, believe that every crypto trader should have access to the best trading tools. That’s why the Good Crypto app allows you to trade Trailing Stop Market and Trailing Stop Limit orders on all the crypto exchanges we support. You can use our Trailing Stop Orders to trade on Binance, Kraken, Bittrex, HitBTC or any of the other 25+ crypto exchanges in the app.

At first glance, Trailing Stop orders may seem too complicated and may take some time to master.
A Trailing Stop buy order follows the market price while it is falling and places a buy order if/when the price rises from the local “bottom” by the amount set as the Trigger Distance.

Trailing Stop Sell order follows the market price until it rises and places a Sell order if/when the price falls from the local peak by the amount set as the Trigger Distance.

Example:

The current price of BTC = $10,000 and you send a Trailing Stop Sell Order with Trigger Distance = $100.

The Order Trigger (or Stop in traders slang) will initially be set at ($10,000-$100) = $9,900.

If the BTC price falls to $9,900 after sending the order – the Order Trigger will be triggered and the Market Sell Order will be sent to the exchange.

If the market price will fluctuate between $9 900 and $10 000 (between the order trigger and market price at the moment of sending the order) – nothing will change. The order will remain “on hold” and the order trigger will remain at $9,900 – $100 away from the market price at the time the order is shipped.

However, if the market price rises above $10,000 – the order trigger will go up behind it to stay at the set distance of $100. Thus, if the price rises to $10,100, the order trigger will move $10,000, and if the market price rises to $10,200, the trigger will move $10,100.

The order trigger will move higher with the market price, but will remain in place if the price goes down. If the market price at any point falls enough to “touch” the trigger – it will trigger and the base order (Market or Limit) will be sent to the exchange.

Trailing Stop Orders are a great tool for entering a long or short position when the price trend reverses. It allows you to enter a position at a more attractive price without going against the current price trend, and also increases the likelihood that price will continue to move in the direction you want once you enter the position.

Trailing Stops are also an ideal tool for exiting existing positions, whether long or short. They act as both a Stop Loss and smart Take Profit, limiting maximum loss but not limiting potential gain – allowing you to keep profitable orders open while the market is moving in your direction and exit when the trend reverses.

Good Crypto allows you to place Trailing Stop orders on all 25+ crypto exchanges in the app. Trade with Trailing Stops on any exchange from Binance, Bittrex, Kraken and HitBTC to Yobit, Exmo and Kuna!

Trading Strategy 1: Entry into a long position with a Buy Trailing Stop

Market: BTC price = $10,600.

Trading Idea: Bitcoin fell from $11,000 to $10,600 on news of an investigation against one of the leading derivatives exchanges. You expect the price to rise after the sharp drop, but you worry that it may fall even lower before the “bounce” begins.

Order: Trailing Stop: buy 1 BTC. Trigger Range: 1%.

The order trigger will initially be set at ($10,600 + 1%) = $10,706.

The Order Trigger will follow the market price: if it goes lower, the Trigger will also go lower (to keep the 1% distance). If the price goes up, the trigger stays in place. The order will be filled when the price rises to the level where the order trigger is set.

After the order is shipped:
Scenario 1: The market price continues to drop to $10,400, then starts to go up.

Result: Your order is executed at ($10,400 + 1%) = $10,504. You are at the lower price and when the price returns to $10,600 (the level you originally set) you will be in the plus side!

Scenario 2: The market price goes from $10,600 to $10,800.

Result: Your order is filled at ($10,600 + 1%) = $10,706. You are “short” on potential gains from going from $10,600 to $10,706, but you entered a position on a strong uptrend while still having insurance for Scenario 1.

Scenario 3. The market price is “dangling” in the $10,550-$10,650 range.

The result: Your order tracks the market price and waits for it to go further up or down. At the same time, each price movement below $10,600 moves the order trigger lower. When the price drops to $10,550, the trigger will drop to ($10,550 + 1%) = $10,655.6 and stay there. If the price band is broken down, that is Scenario 1. If the range is “broken” upwards, the improved version of Scenario 2 will be implemented – your order will be executed at $10,655.6.
You may also use the Trailing Stop on Sell to open a short position – the implementation of this strategy will mirror the above example of entering a long position.

Trading Strategy 2: Exit Long with Trailing Stop to Sell

Position: 1 BTC (long).

Market: BTC price = $10,600.

Trading Idea: You entered a position (bought 1 BTC) after bitcoin fell from $11,000 to $10,600 amid news of an investigation against one of the leading derivatives exchanges. You expect the price to rise after the sharp drop, but you worry that it may fall even lower before the “bounce” begins.

Order: Trailing Stop: Sell 1 BTC. Trigger Range: 1%.

The order trigger will initially be set at ($10,600 – 1%) = $10,494.

The Order Trigger will follow the market price: if it goes up, the trigger will also go up (to keep the 1% distance). If the price falls, the trigger will stay in place. The order will be filled when the price falls to the level where the order trigger is set.

After the order is shipped:

Scenario 1: The market price continues to drop to $10,400, then starts to go up.

Result: Your order is executed at ($10,600 – 1%) = $10,494. Your Trailing Stop is actually triggered as a Stop Loss at 1% of your entry price.

Scenario 2: The market price rises from $10,600 to $10,800.

Result: your order is still open, but your order trigger has moved to ($10,800-1%) = $10,692. Now even if the market declines, the worst price you would exit your position at would be $10,692, guaranteeing you a profit. Essentially, your Trailing Stop Loss has just turned into a Trailing Take Profit.

Since your order remains open, if the market rises further, the profit you will lock in by closing the position will only increase.

Scenario 3: The market price “stabilizes” in the $10,550-10,650 range.

Result: Your order tracks the market price and waits for it to move further up or down. At the same time, each price movement above $10,600 also moves the order trigger higher. When the price rises to $10,650, the order trigger goes up to ($10,650-1%) = $10,543.5 and stays there. If the next sharp price movement is up, that is Scenario 2. If the price “breaks” the corridor down, the improved version of Scenario 1 will be implemented – your order will be executed at the level of $10 543.5 and the loss will be <1%.

GoodCrypto PRO: you could avoid a $10,494 loss exit in Scenario 1 by setting the Trigger Distance to 2% or more. A larger Trigger Distance allows the order to “ignore” short-term price fluctuations and avoid exiting at the wrong time, but also increases the potential loss if the price falls further.

You can also use a Buy Trailing Stop to exit a short position – the implementation of this strategy will mirror that of the above example of exiting a long position.

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