Plan a Smart and Profitable Exit Strategy using the Right Trailing Stops

Plan a Smart and Profitable Exit Strategy using the Right Trailing Stops Every kind of investment has a beginning, middle, and the end. And, before placing any trade, it’s important for a trader to plan an entry and exit strategy. Sometimes traders enter a particular trade, and then don’t know when is the right time to stop, and how?

So, there should always be a trading plan in place before entering any trade. Money management is one of the most important aspects that one must consider while placing any trade. Many traders spend hours on their system fine-tuning their entering strategy, but at last, they lost all their hard-earned money by taking the bad exits. In fact, most of the traders lack effective exit planning, and are more likely to run losses or take premature profits. Each investment has an entry and exit plan which should be planned smartly to stick to the predetermined decisions.

Therefore, an exit strategy is vital to any trading plan. If you are a regular crypto trader then you must be aware of the advanced trading methods. Investors can’t spend 24x7 on systems to monitor their portfolios, and therefore they need a way to protect themselves from huge losses. Making use of crypto trading bots and advanced orders which traders can use to exit a position automatically are of greater help.

One such trading technique used by expert traders is making use of Trailing Stop orders. It’s a kind of stop-loss strategy where a sell order is executed once the asset price is dropped by a specific amount or percentage.

Plan your exit strategy smartly There is no one-size-fits-all trading plan, but make sure to plan your exit points based on a specific loss tolerance and the profit target. To help you make sure that you exit an investment at a price you’re comfortable with, setting up a limit order is the better option.

This is a standing order to buy or sell assets at a specific price.

Stop orders are the kind of orders that are used by traders to manage risks and profit taking. There are different types of stop orders like trailing stop sell, trailing limit sell, stop market order, stop limit orders, etc. which traders can place to play smartly in crypto trading.

Let’s have a look at these order types:

Stop loss orders These orders allow traders to place a target price on the downside where you want to sell your order. Whenever that price hits, your order will be converted into a market order and will be sold at the next available price with profit.

Stop limit order These order types act like stop loss orders but it’s different in the way that it sends a limit order rather than market order to execute any trade. It’s a kind of regular stop order which becomes a limit order when an order is triggered. This order type can be used to buy or sell whenever you want to be more precise about which price is suitable.

Trailing stops Every trader can enjoy the benefits of trailing stop orders as this order type is a safeguard against those unwanted price changes. These are the advanced order types offered by the best crypto trading platforms like TrailingCrypto to buy or sell crypto assets if they move in the direction which traders may find unfavorable. Basically, there are two types of trailing stops used by traders i.e. Trailing Buy and Trailing Sell. Traders can use these order types as per the market trends.

These are the best exit strategies used by the expert traders. The most popular exit strategies are Trailing stop sell and Trailing limit sell. Let’s understand these one by one: Trailing Stop Sell In this order type, the trader sets the stop price at a fixed amount below the current market price. If the market price of the asset increases, the stop loss price will also increase, but if the market price falls, the stop loss price will remain the same. This strategy allows the investors to limit their maximum possible losses without limiting the possible gains.

Trailing limit sell This order type is executed at the limit price or higher. In this order type, the trader will set a price. A trailing limit sell order allows a trader to specify a limit price on the maximum possible loss and maximum possible gain. The trailing limit sell order will move with the market price and recalculates the trigger price at a fixed amount just below the market price. The limit order price is calculated as per the limit offset. As soon as the market price of the asset increases, the stop price and limit price also increase by the trail amount and the limit offset. But if the price moves down, the stop price will remain unchanged.

Trailing limit sell orders are used to build discipline in your trading strategy by providing a way to benefit from the higher upside prices while specifying a limit on the downside prices of the asset.

Why it is better to plan an exit strategy with trailing stops?

There are three main benefits of using trailing stops as your exit strategy:   

It will allow you to secure your potential gains whenever the market swings in unfavorable direction While securing your gains, it will not place a cap on your potential gains It will also help you to set a limit on the potential losses

Conclusion Risk management in crypto trading is at the forefront of every trading strategy.

Developing the right exit strategy with dynamic stop loss levels will help traders to maximize their returns without risks. Choose the right order type and enjoy the potential gains.

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