What is a trailing stop loss and how to use it in Cryptohopper

Listen to this article:
Voiced by Amazon Polly

One of the great features of Cryptohopper is the trailing stop loss. If you are bot trading or manually trading, it is important to understand this feature as it can save you a ton of losses. In this article, we’ll explain you exactly what a trailing stop-loss (TSL) is and how you can add TSL settings in Cryptohopper. The terminology may be a bit confusing if you are new to this. What’s most important is to understand these two:

-Trailing stop loss (TSL) percentage

-Arm trailing stop-loss percentage


What is a trailing stop-loss?

trailing stop loss

Let’s use an example. You’ve opened a trade with the following settings:

-Profit: 5%

-Stop loss: 4%

This means that your trade is going to either sell with a 5% profit or with a 4% loss. What if your trade goes well for a while and goes up to +3,5% but it fails to reach +5% and instead starts dropping? Chances are that your position is going to sell at -4% (stop-loss). This is something you want to avoid and that is where the trailing stop-loss comes in.

A trailing stop-loss allows you to make some profits even if your trading position doesn’t reach the profit target. The TSL needs to be activated by something called the arm trailing stop-loss.

In this example, let’s use these arm trailing stop-loss and trailing stop-loss percentages:

-Arm trailing stop-loss: 3%

-Trailing stop-loss percentage: 1%

The arm trailing stop-loss determines at which moment your trailing stop-loss percentage is activated. We mentioned earlier that the trade moved into +3,5%. When the position hit +3%, it was ‘armed’ because our arm trailing stop-loss was set at 3%. What does this actually mean? Here’s the clue.

The trailing stop-loss percentage, which is set at 1%, is now activated. If your position drops by 1%, your position is going to sell.

So your trade moved to +3,5% but then failed to go any higher. It then dropped by 1% and has reached +2,5%. With the current settings, your bot is going to sell your position now with a 2,5% profit!

The arm trailing stop-loss can also be seen as a safety net.

Other scenarios for this example:

-If your position moves to +4% and then drops 1%, it will sell at +3%

-If your position moves to +4,2% and then drops 1%, it will sell at +3,2%

-If your position moves to +5%, the trailing stop-loss is irrelevant and your position will sell because you’ve set your profit at +5%

-If your position moves to +5%, the trailing stop-loss is irrelevant and your position will sell because you’ve set your profit at +5%

The trailing stop-loss percentage is calculated from the highest point your position has reached.

What if your arm trailing stop-loss is 3,8% and your trailing stop-loss percentage is 2,2%? If your position moves to +3,8%, it is ‘armed’ and thus your trailing stop-loss percentage is activated.

Then:

-If your position doesn’t go any higher than 3,8% and then drops 2,2%, it will sell at +1,6%

-If your position moves to +4% and then drops 2,2%, it will sell at +1,8%

-If your position moves to +4,6% and then drops 2,2%, it will sell at +2,4%

Until now we’ve used an example with a relatively small profit, arm trailing stop-loss and trailing stop-loss percentage. What if you want to aim big? Let’s say, 80% profit. This is an ambitious goal but if you’ve spotted a trading position with a high potential, you can aim big but the arm trail can help you in case your position doesn’t go as far as +80%. With this profit aim, you may want to set your arm trailing stop-loss at 40%, your TSL percentage at 10% and your regular stop-loss at -10%.

Thus:

-If your position reaches +30% and then drops to -10%, it will sell with a 10% loss

-If your position reaches +40%, your position will be armed

-If your position moves to +45% and then drops 10%, it will sell at +35%

-If your position moves to +60% and then drops 10%, it will sell at +50%

-If your position moves to +80% without dropping 10% in the meantime, a sell order will be placed at +80%

Remember this: Once your position reaches the arm trailing stop-loss percentage, the trailing stop-loss percentage is activated.


What happens to the regular stop loss?

Actually, when your trailing stop-loss is activated, it means that your regular stop-loss becomes irrelevant. That is the great thing about the TSL!

Example

Let’s use an actual example to see how the trailing stop-loss works in Cryptohopper. In this example we will focus on manually inserting the settings of one position. Afterwards we’ll show you how you can automate the arm trailing stop-loss and TSL percentage settings in Cryptohopper.

In this example we’ve purchased some BNT. After purchasing the coin we are manually adding settings. You can do this in Dashboard > Open Positions > Info.

As you can see, for this BNT position we are aiming for a 3% profit.

trailing stop loss profit

The next thing we are doing is enabling the stop-loss at 2%.

trailing stop loss percentage

Now we are going to insert details in the trailing stop-loss screen. The first thing we do is enabling TSL. Next we are inserting the TSL percentage (0,6%) and the arm trailing stop-loss (1,2%). Remember what this means: If the positions reaches +1,2%, the trailing stop-loss percentage (0,6%) will be activated!

enable trailing stop loss

You can also see that the TSL is not yet armed (see ‘Stop loss rate’). The good news is that in the following hours our position has been on the rise and has reached +1,2%. Our position has been ‘armed’! There are now two options:

-Our position will be sold if it drops 0,6% from it’s highest reached position

or

-Our position will sell at 3% profit

Note that the stop-loss rate now contains an actual number. This number is the 1,2% (arm trailing stop-loss) minus 0,6% (trailing stop-loss percentage). If our position doesn’t rise any higher but instead drops 0,6%, it is going to place a sell order at +0,6%.

stop loss rate

In the next few minutes our position went slightly up to 1,25%. Notice the difference in the ‘stop-loss rate’ number! Because the position went up, so did the stop-loss rate. If our position drops 0,6% from now on, a sell order will be placed at +0,65% (1,25% minus 0,6%).

arm trailing stop loss activated

We are aiming for a 3% profit and our position was doing quite well but halted around +1,25%. Our position went down and eventually it went down by 0,6% (stop-loss percentage). This means that a sell order was been placed once it dropped 0,6%. Our coin eventually sold with a 0,66% profit. The sell was triggered by the TSL settings.

trigger trailing stop loss

Other scenarios:

-After reaching +1,25%, our position drops by 0,3% (to +0,95%) but then starts to rise again. It goes up to a new peak (+1,95%) and then drops by 0,6%. Our position sells at +1,35%.

-Our position drops 0,4% to +0,85%. It then rises and keeps dropping but it never drops by 0,6% from its highest peak, thus no sell order is placed. Our position rises and eventually the profit sell trigger kicks in when it reaches +3%.


Where can I insert automated TSL settings in Cryptohopper?

In the previous example we’ve manually added all the profit, stop-loss, arm trailing stop loss and trailing stop loss percentage settings. You can also automate all these settings. To enable trailing stop-loss in Cryptohopper, go to Config > Base config > Trailing stop-loss.

trailing stop loss settings

First you’ll need to ‘enable’ the trailing stop-loss and then manually enter your preferred trailing stop-loss percentage and arm trailing stop-loss.

We recommend you to test with arm trailing stop-loss and TSL percentages. It can be tricky to find the right balance. Sometimes your trade reaches the profit target but because the TSL percentage is too low, your position was already sold at a much lower profit.

Disclaimer: This is not trading or investment advice. The above article is for educational purposes only. Please do your own research before purchasing or investing into any cryptocurrency.

Related Posts

Share This