Trailing stop loss is a powerful tool in forex trading that allows traders to protect their profits by automatically adjusting their stop loss level as the price moves in their favor. This feature is available in the MetaTrader 4 (MT4) platform, one of the most popular trading platforms used by traders worldwide.
In this article, we will explore how to determine trailing stop loss in MT4 forex trading.
What is a Trailing Stop Loss?
A trailing stop loss is a type of order that automatically adjusts the stop loss level as the price moves in favor of the trade. This means that the stop loss level will trail the current price at a set distance, which allows traders to protect their profits in case the market reverses.
For example, if a trader buys EUR/USD at 1.2000 and sets a trailing stop loss of 50 pips, the stop loss level will be at 1.1950 if the price moves up to 1.2050. If the price then moves up to 1.2100, the stop loss level will move up to 1.2050, which means that the trader has locked in a profit of 50 pips.
How to Determine Trailing Stop Loss in MT4 Forex Trading?
To determine trailing stop loss in MT4 forex trading, traders need to follow these simple steps:
Step 1: Open a Trade
First, traders need to open a trade by selecting the currency pair they want to trade and choosing the buy or sell button. Once the trade is open, the trade will appear in the terminal window.
Step 2: Set a Stop Loss
Next, traders need to set a stop loss level. This is the level at which the trade will be closed if the market moves against the trade. To set a stop loss level, right-click on the trade in the terminal window and select “modify or delete order.” Then, enter the stop loss level in the Stop Loss field.
Step 3: Set a Trailing Stop Loss
To set a trailing stop loss, right-click on the trade in the terminal window and select “trailing stop.” Then, choose the distance at which the stop loss level should trail the current price. This distance is usually measured in pips.
For example, if a trader wants to set a trailing stop loss of 50 pips, they would enter “50” in the Trailing Stop field. The stop loss level will then trail the current price by 50 pips.
Step 4: Monitor the Trade
Once the trailing stop loss is set, traders can monitor the trade and watch as the stop loss level moves up or down depending on the price movement. If the price moves in favor of the trade, the stop loss level will move up, which means that the trader is locking in a profit. If the price moves against the trade, the stop loss level will remain at the current level, which means that the trader is protected against further losses.
Conclusion
Trailing stop loss is a powerful tool in forex trading that allows traders to protect their profits by automatically adjusting their stop loss level as the price moves in their favor. In MT4 forex trading, traders can easily set a trailing stop loss by following the steps outlined above. By using this feature, traders can minimize their risk and maximize their profits, which is essential for long-term success in forex trading.
