Forex Trading - Using Trailing Stops

I just learned yesterday about using trailing stops. If you put on a trailing stop, you set the number of pips (the minimum is 15) that your stop will follow the price as it (hopefully) goes up.

This can be a good thing or a bad thing. Apparently some traders love using trailing stops, others don't use them at all.

What it means is that if you set for example a trailing stop of 20 pips, as the price moves up and reaches 21 pips from your original buy price, the stop loss will start to move up with the price. The stop loss will remain 20 pips behind the price, so as your profit goes higher, the most you can lose if it reverses and heads in the wrong direction is 20 pips.

The problem with this can be that as we find out when we start forex trading, the market can be pretty volatile and if you have your stop loss too close the the price point, it can go back, close your trade and then move on to where you originally had your take profit point.

This is something I'm going to play with however. As I said the lowest you can set a trailing stop is 15 pips, but you can set it higher - to where you want it. I think it will be a great thing when i can't watch the charts - which is often as it means I can secure some of my profit.

So often I put on trades and the almost reach my take profit point that I've set, and then they turn around and go the other way, stopping my out - which drives me nuts!

I'll be doing some testing with this probably on my demo account and live and I'll keep you posted.