How to Use the Trailing Stop in MT4

Filed under: Learn Forex Trading |

 

One of the best tools in the Metatrader 4 toolkit is the “Trailing Stop” function, and if you don’t already use it, it might be worth your while looking into it.

 

Figure 1.

If you have never seen the trailing stop tool before in MT4, it might be because it is a little bit hidden away. Once you have a trade on, go to the trade in your terminal and right click on it. Figure 1 shows the menu that will pop up. Move your mouse over the “Trailing Stop” item on the menu, and a sub-menu will appear showing you a variety of options. The one that you will want is the “Custom…” option. This allows you to set exactly, how many pips you want your trailing stop to be.

 

You should already have a “hard stop” in place to protect your bank. This ideally should not be more than a risk of 2% of your bank, with 1% being more realistic. You should also know how many pips away from your entry this is, and this is a good figure to work off when deciding on your trailing stop.

 

The way that the trailing stop works is to let your trade move into a profit first, leaving your hard stop in place, and then once it is a certain number of pips in profit, your trailing stop will then take over. For example, your hard stop could be 150 pips from your entry, and you might use half of this figure, 75 pips, to set your trailing stop at. This means that once your trade is 75 pips in profit, the trade will move to breakeven. After that, you stop will be hit once the trade has moved 75 pips against you. This could be right away, or it could be after you go 1000 pips in profit and then it pulls back by 75 pips. The point of the trailing stop is thus to give you the best chance of letting your profits run.

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