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There are situations when an asset’s price moves up significantly but “guessing” the top as a Take Profit target is hard. Let’s look at an example:
– You decide to enter a trade during an expected price rally
– Not knowing where the top is, it is hard to establish the resistance and support levels
– This situation is quite common in the crypto market – for example, BTC rallied to a 35% gain on October 25
The solution to capturing as much of the rise as possible while protecting against a potential price reversal is the Trailing Stop setting available on 3commas but not on most exchanges.
How does the Trailing Stop work?
A trailing stop is designed to protect gains by enabling a trade to remain open and continue to profit as long as the price is moving up. A trailing stop is a stop order that can be set at a defined percentage away from a coin’s current market price. The order closes the trade if the price changes direction by a specified percentage.
For clarity, let’s look at an example on the chart.
Suppose you enter into a transaction at the level shown by the blue line, and the coin’s price begins to rise to the level shown by the red line. As we don’t know whether the price will continue to rise, a 20% trailing stop will allow you to secure profits at the green line level. Profitable, convenient and with downside protection.
In order to use this on 3commas , just enable and configure the Trailing Stop feature in the Smart Trade menu section:
The slider sets the trailing value in percentage points away from the current price. When the price of the coin goes up, the Stop Loss also moves up by the chosen percentage. When the price of the coin goes down, the Trailing Stop does not move and the Stop Loss triggers a Sell order so you can lock in profits.