Trailing Stop Tutorial

1. What is a Trailing Stop order?

A trailing stop is a stop order that tracks the market price. Its trigger price changes with the market price. Once it's triggered, a market order will be placed. A trailing stop can help you dynamically take profits or stop losses in fluctuating market conditions.

You can set an Activate price which will determine when the trailing stop is activated.

2. Definitions

Trail variance: The trail variance is a custom percentage, along with the recorded highest/lowest prices, used to calculate the actual trigger price. For example, if you order a sell with a 5% trail variance and the historical highest price is 50,000 USDT, the current actual trigger price is 50,000*(1-5%)=47,500.

Activate price: Reaching the activate price is a prerequisite for the trailing stop order to become active. When the market price reaches or exceeds the activate price, the trailing order is activated. Once activated, the system will calculate the trailing stop's actual trigger price. If the activate price is left empty, the trailing stop order will be activated once the order is placed.

3.Activation rules:

If the activate price = the latest price when the order is placed, then the trailing stop order will be activated immediately.

If the activate price > the latest price when the order is placed, then the trailing stop order won't be activated until the latest price ≥ the active price.

If the activate price < the latest price when the order is placed, then the trailing stop order won't be activated until the latest price ≤ the active price.

Trigger rules:

Buy: latest price ≥ trigger price

Sell: latest price ≤ trigger price

Trigger price:

Buy: [Var.] lowest price + trail variance; [Percentage] lowest price* (1 + trail variance)

Sell: [Var.] highest price - trail variance; [Percentage] highest price* (1 - trail variance)

4. User scenarios (BTC/USDT)

Scenario 1. James wants to sell BTC and he hasn't set an activate price for the trailing stop order. The latest price for BTC is 30,000 USDT. James places a trailing stop order as shown below.

Trail variance: 2,000

Amount: 1 BTC

Assuming BTC's price rises to a historical high of 40,000 and then drops to 38,000, the trailing variance is 2,000 and the trigger condition is met (40,000 - 2,000= 38,000). The system will then help James sell at the market price.

Scenario 2. Jean wants to buy BTC and the latest price is 40,000 USDT. Jean places a trailing stop order as shown below.

Trail variance: 5%

Activate price: 30,000

Amount: 1 BTC

Assuming BTC's price drops to 30,000 USDT, the order becomes activated. Then the price falls all the way to 20,000 USDT before rebounding to 21,000 USDT, meeting the trigger condition (20,000 * (1 + 5%) = 21,000). The system will then help Jean buy at the market price.