In today’s discussion, we delve into the art of maximizing profits through trailing stoploss strategies in Crypto trading. A Crypto Trading bot autonomously evaluates and executes orders based on predefined entry and exit conditions. Upon meeting the exit condition, the bot swiftly exits the trading position by executing the sell order, thereby completing the deal.

There are two primary exit conditions:

  1. Take Profit: The take-profit instructs the bot to close a deal once the profit reaches a percentage of the fund allocation.
  2. Stoploss: A stoploss condition instructs the bot to close a deal once the loss reaches a percentage of the allocated Fund.

First, let us understand the meaning of Trailing Stoploss.

Definition: A trailing stoploss is a dynamic risk management tool used in trading to protect profits and limit losses as the market price moves in a favorable direction. Unlike a traditional Stoploss order, which is static and remains at a fixed price level, a Trailing Stoploss adjusts automatically as the market price fluctuates, “trailing” behind the current market price by a specified distance.

 In CryptoHeroes Advanced bot, there are several kinds of stop-loss conditions. The simplest is the Absolute stoploss.  Another stoploss condition is called the Trailing stoploss. 

How Trailing Stoploss works:

Trailing stop loss is designed to lock in profits by moving the stoploss level upwards in tandem with an upward moving stock price, if the stock price drops after undergoing an uptrend. The increased stoploss level will be hit, when this happens it ends up capturing profits for the Trader. 

 

  • Setting the Initial Stoploss: When a trader enters a trade, they set an initial stoploss price level. For long positions (buying assets with the expectation of price appreciation), the initial stop-loss price is typically set below the current market price. For short positions (selling assets with the expectation of buying them back at a lower price), the initial stoploss price is set above the current market price.
  • Dynamic Adjustment: As the market price moves in the trader’s favor, the trailing stoploss dynamically adjusts its price level to maintain a certain distance below (for long positions) or above (for short positions) the highest market price reached since the order was placed.
  • Protecting Profits: If the market price continues to rise for long positions or fall for short positions, the trailing stoploss moves in the same direction, allowing traders to capture additional gains while still having protection in place. If the market price reverses direction and reaches the trailing stoploss price, the position is automatically closed, locking in profits.
  • Limiting Losses: Trailing stoploss orders also help limit potential losses by automatically closing the position if the market price moves against the trader and reaches the trailing stoploss price. This helps traders mitigate the risk of significant drawdowns and preserve their trading capital.
  • Execution of the Order: Once the trailing stoploss order is triggered, it becomes a market order and is executed at the prevailing market price. The execution may not always occur at the exact stoploss price, especially during periods of high volatility or low liquidity.

At CryptoHero, premium and professional users have access to Advanced Crypto Trading Bots offering two types of trailing stoploss: Fixed trailing stoploss and Variable trailing stoploss.

Fixed trailing stoploss: The stoploss level increases at a fixed preset interval based on a percentage. Let’s illustrate this with a simple example.

In this example, we instruct the Crypto Trading Bot to set the stoploss level at 1% below the current price of the asset each time the price increases above the Buy price by 2%. For instance, if the bot opened the deal when the stock price is at $100 and the price has moved to $102, the stop loss will be at 1% lower than the current price, resulting in $1.98 (99% of $102). If the stock price increases to $104, the new stoploss will be at $102.96 (99% of $104). Notice how the trailing stoploss readjusts each time the stock price increases by 2%.

If the fixed trailing stoploss seems too inflexible for the situation, the variable TSL might be a better fit. As the term “variable” suggests, users can set the stoploss levels at varying percentages above the Buy price.

For example, the first level for the trailing stop loss can be set at 1% below the stock price. When the price reaches 2% above the buying price, a second level stop loss can be added by setting it 2% below the prevailing stock price. If the price reaches 6% above the Buy price, CryptoHero allows users to set an unlimited number of stoploss levels using trailing stoploss effectively. This enables traders to better manage risk and capture profits.

Also learn what are the factors that can affect the Success Rate of Crypto Trading Bot. CLICK HERE

 

Disclaimer

Any information provided in this article is not intended to be a substitute for professional advice from a financial advisor, accountant, or attorney. You should always seek the advice of a professional before making any financial decisions. You should evaluate your investment objectives, risk tolerance, and financial situation before making any investment decisions. Please be aware that investing involves risk, and you should always do your own research before making any investment decisions.