Fair Value Gap (FVG)

Detailed Explanation

A Trailing Stop is an automated risk management tool that only moves in the direction of profitable price movement and never widens. It trails the current market price by a fixed distance (e.g., in pips or points) to lock in profits.

Concrete Numerical Example: BUY Trade on EUR/USD

• 1. The Entry: You buy EUR/USD at 1.1000 with a standard Stop Loss at 1.0980 (20 pips risk). You also configure a 20-pip Trailing Stop.
• 2. Price Moves in Profit: EUR/USD rallies to 1.1030 (+30 pips). Because price moved 30 pips in your favor, the 20-pip trailing stop activates and pulls your Stop Loss up to 1.1010 (which is exactly 20 pips behind the new current price of 1.1030).
• 3. Profit Locked In: Your Stop Loss is now above your entry price (1.1000). You have guaranteed a minimum profit of +10 pips even if the market completely reverses.
• 4. Further Rally: The market pushes higher to 1.1050. Your trailing stop automatically moves up to 1.1030. You now have a guaranteed profit of +30 pips.
• 5. The Reversal: The market suddenly drops from 1.1050 down to 1.1025. Because a trailing stop never moves backward, your stop loss remains firmly at 1.1030. The trade is closed automatically at 1.1030, securing your 30-pip profit before the market crashes further.

Trailing Steps

Advanced algorithmic systems also use a Trailing Step. If you set a trailing step of 5 pips, the trailing stop will only modify the Stop Loss in increments of 5 pips, rather than adjusting on every single tick. This reduces server load and prevents broker rate-limiting.