Understand how to use trailing stop-loss orders to protect your investments during price fluctuations.
A Trailing Stop Order allows you to hold on to an asset while the price is rising but automatically sells it if the price drops by a percentage (that you specify) from its highest peak.
It therefore gives you the opportunity to benefit from any upside, while protecting your downside.
Scenario:
You buy an asset for $10 and set a Trailing Stop Order (TSO) to automatically sell the asset if its price falls by 10% from its highest point after purchase.
If the price drops to $9, your TSO order will kick in and sell the asset, limiting your loss to 10%.
But if the asset's price goes up to $20, the TSO order adjusts. Now, it will sell if the price drops 10% from $20, which is $18.
The TSO order keeps adjusting with rising prices, always setting the sell point 10% below the highest price.
If the asset's price then falls from $20 to $17, your TSO order will have already sold at $18. This means you've made a profit of 44% on your trade.
| Feature | Description |
| Type of order | Trailing Stop Order |
| How it works | Follows the price of an asset as it moves and is triggered when the price falls by a certain percentage |
| Benefits | Can help to limit downside losses and take profits on rising prices |
| Risks | Can be triggered prematurely if the price of an asset falls sharply |
When you are making a transaction within your Uphold account you can at the same time set up a Trailing Stop Order for the asset that is being purchased by following the simple steps below:
- Tap Trailing Stop
- Choose the % loss
- Tap Confirm
- Tap Preview trade
- Confirm your trade.
The asset that’s purchased will then have a trailing stop order applied to be sold, to your account’s default currency at the time the trailing stop order was set up, once the chosen conditions are met.
Here are some of the advantages of using Trailing Stop Order:
- They can help you to limit your losses.
- They can help you to take advantage of rising prices.
- They can be used to automate your trading.
No, a TSO order does not guarantee a profit, however it does protect your downside by the percentage you specify.
Here are some of the risks involved in using Trailing Stop Order:
- If the price of the asset falls sharply, you may sell the asset at a loss that is greater than the specified percentage.
- If the price of the asset rises sharply, you may miss out on profits.
- Trailing Stop Order can be triggered by false signals, such as news events or technical indicator.
Yes, you can cancel a Trailing Stop Order order at any time before it is triggered. Once the Trailing Stop Order is triggered, it will be executed automatically, and you will not be able to cancel it.
- Tap Menu > Activity > Limit… to see Active and Expired TSO orders.
- Select the Trailing Stop Order you wish to cancel in the Active Tab.
- Tap (CANCEL ICON) at the top right corner of the screen and confirm.