Forex trading can be a lucrative business if done correctly, but it requires a lot of skill, research, and planning. One of the most important aspects of profitable forex trading is managing risk, which is where a trailing stop comes in handy. A trailing stop is a type of order that allows traders to lock in profits and limit losses by automatically adjusting the stop-loss order as the market moves in their favor. In this article, we will explain how to set up a forex trailing stop on the thinkorswim platform, a popular trading platform for forex traders.
Step 1: Open a Trade
The first step in setting up a trailing stop on thinkorswim is to open a trade. To do this, you will need to find the forex pair that you want to trade in the trade tab. Once you have found the forex pair, you will need to click on the “buy” or “sell” button to open a trade.
Step 2: Set the Stop-Loss Order
The next step is to set the stop-loss order. A stop-loss order is an order that is placed with a broker to sell a security when it reaches a certain price. This is done to limit the trader’s losses in case the market moves against them. To set the stop-loss order on thinkorswim, you will need to right-click on the open trade and select “create closing order.” Then, you will need to select the “stop-loss order” option from the order type drop-down menu.
Step 3: Set the Trailing Stop
Once you have set the stop-loss order, you can set the trailing stop. A trailing stop is a type of stop-loss order that is adjusted automatically as the market moves in the trader’s favor. This allows traders to lock in profits and limit losses. To set the trailing stop on thinkorswim, you will need to click on the “advanced order” button in the order entry window. Then, you will need to select the “trailing stop” option from the order type drop-down menu.
Step 4: Set the Trailing Distance
After selecting the trailing stop option, you will need to set the trailing distance. The trailing distance is the number of pips or points that the stop-loss order will be placed behind the current market price. For example, if the current market price is 1.2000 and the trailing distance is set to 20 pips, the stop-loss order will be placed at 1.1980. To set the trailing distance on thinkorswim, you will need to enter the number of pips or points in the “trailing amount” field.
Step 5: Place the Order
Once you have set the trailing stop, you can place the order. To place the order, you will need to click on the “place order” button in the order entry window. The order will then be sent to the market, and the trailing stop will be activated.
Conclusion
In conclusion, setting up a forex trailing stop on thinkorswim is a simple process that can help traders manage risk and increase profitability. By following the steps outlined in this article, traders can set up a trailing stop on thinkorswim and trade with confidence knowing that their profits are protected and their losses are limited. However, it is important to remember that trading involves risk, and traders should always use proper risk management techniques to minimize their losses.
