Thursday, June 29, 2017

Forex Trailing Stop Loss Trading Example

November 10, 2011 by  
Filed under Forex FAQ & Latest Post


I am glad that I have received emails from readers telling me how much they like the post that I have written about the trailing stop loss a few days back. At the same time, there are readers who ask me to show them examples of how to use this trailing stop loss and that is exactly what I am going to do in this post.

Let us start with using the EURUSD 4 hour chart as an example. Let says that I decided to enter a trade at 1.33783 where the price came back to retest the new support.

At this point of time, I could set a trailing stop loss at 1.35783 which is 200 pips from the point of entry. Do note that you still have to set a normal stop loss as the trailing stop loss will only be activated when the price hits 1.35783. When setting your trailing stop, you need to specific after how many pips of retracement you are going to exit your position. In this example, I will set it to 30 pips.

The trailing stop loss level is always your target profit. The whole purpose of using trailing stop is to get more pips from your trade. Once the trailing stop loss is activated, your normal stop loss will be deactivated.

From the picture below, you can see that the price has hit the red line which is where the trailing stop loss is being placed. After hitting that level, the price continued to move another 112 pips which means that you are making additional profit.

As the price retraces back by 30 pips, your position will then be closed. In this example, you are making extra 82 pips from the normal 200 pips trade. As I have stated in my previous post, this type of stop technique is only applicable to trade with at least 80 pips of target profit and above.

I hope that this example is good enough to show you how this technique works and do feel free to give your comment below. If you have question, do feel free to ask by commenting below.

Comments

8 Responses to “Forex Trailing Stop Loss Trading Example”
  1. KRISTOFA OKENTA says:

    Thank you dear Kelvin for this nice information. With the picture the illustration is more clear. But you did not show where you placed your original or initial stop loss. You showed the entry point, the trailing stop point, the profit target and the extra move which retraced 30pips back.
    All those was clear but please do show where the initial stop loss was. Was it before or below the entry point?

    • Kelvin says:

      Hi Kristofa

      I did not show you the initial stop loss as the amount of stop loss differ per trader.

      If you are going LONG, the stop loss will always be below the entry. If you are going SHORT, the stop loss will always be above the entry.

  2. tarun singh says:

    Hi
    Kalvin,
    I want to buy your master skills books but in india i think we have forex trading little different then us or europe market bcoz here 200 pips is brokrage only.i am confused what to do bcoz u have wrote a book for us eur forex trader so pls suggest me.

    • Kelvin says:

      Hi Tarun

      The book that I have written is not just for EURUSD, the technique is applicable to all currency pairs. So do not worry.

  3. tarun singh says:

    will you pls explain me little on EUR INR OR GBP INR.

    • Kelvin says:

      Hi Tarun

      I will not be able to talk about EURINR or GBPINR as I do not trade INR at all. Really sorry about it. However the concept of trading is universal. What I share here should work for all currency pairs.

  4. Fabian says:

    Dear Kelvin ,

    I just started in trading forex. In fact , I am still using the demo account .

    I just need your professional guide…

    If I anticipate the currency pair and trend will be strong ( a buy position ) , can I set the Stop Loss at 25 pips , the Take Profit at 65 or 85 pips
    and the Trailing Stop at 45 pips. Is this set-up correct ? Pls advise…

    Thanks !!!

    • Kelvin says:

      Hi Fabian

      It is fine to set the stop loss at 25 and take profit at 65 to 85 as you will have a decent risk reward ratio.

      As for your trailing stop loss, 45 is a bit too much. If your profit is 85, my personal opinion is to set your trailing stop at 35 as you will still win 50 pips even if your trailing stop is stopped out and this will give you a 1:2 risk reward ratio. If you are going for the 65 pips profit, the trailing stop loss should be at 15 pips but I feel that it is a bit too tight.

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