Trailing Stop (RM-S)
This type of intelligent order is based on the functionality of the Stoploss order. In order for this order to be used effectively, the basic version has been expanded to include the option to enter a search price. The Trailing Stop variant allows for a timely reaction of the intelligent order until the moment a change in the trend occurs, e.g. a local minimum or maximum price is reached. Once the price changes within the trend, the Stop Price is moved by the entered deviation. If the trend changes, the order remains fixed on the last achieved Stop Price and is then forced to activate the standard buy or sell order located at the depth of the market. Here a Trailing Stop sell order is used to sell below the local or daily maximum during a change in the trend.
A Trailing Stop buy order is used to move the Stop Price downwards to try and buy just above the local or daily minimum during a declining trend.
Due to the fact that it is unknown just how long a trend will continue when the Trailing Stop order is placed, e.g. to which value the Stop Price will be moved to at the moment the order is activated, the order must be a market type order, i.e. without a Limit Price.
Trailing Stop maximizes profit!
- The Trailing Stop order is an intelligent broker order, and is administered in the Fio banka system.
- The order (Stop Price) reacts to changes in bids and offers as opposed to Stoploss, which reacts to trades or the closing price for the day.
- One advantage of Trailing Stop is the ability to enter a Stop Price in terms of changes.
- A Trailing Stop order can also be entered without Limit Prices, meaning it acts as a "market" type order once activated.
- A Trailing Stop order cannot be used with an EasyClick order - in this case a Trailing Limit intelligent order must be used.
Example Trailing Stop sell order
An investor wants to sell 100 shares of ČEZ, which were purchased at CZK 700 in the past in order to realize a profit. The investor considers CZK 870 to be the next upcoming maximum in the price but the price may strengthen slightly during the course of the day. The investor places a Trailing Stop sell order....More
