How to set a trailing stop loss in MT4
A trailing stop loss is a great way for trend traders to manage their positions by protecting an increasing amount of profits.
In the past, traders had to manually shift the stop loss order over time as the market trends in their favour, but these days most trading platforms (including MT4) has the built-in ability to set automatic trailing stop loss orders.
What’s a trailing stop loss?
As the name implies, it is a stop loss order that trails behind the market price by a fixed number of pips.
The further the market price moves in the trader’s favour, the further the trailing stop loss order moves in the same direction, which locks in more and more profit.
Here’s an example of how it works:
It’s important to note that a trailing stop loss will only move in one direction. As the market price moves in your favour, it follows along. But as the market price moves against you, it stays in its current position.
That’s how a trailing stop loss secures your profit in a trending market.
Setting a trailing stop loss in MT4
Thankfully, the default MT4 platform has the in-built function of setting a trailing stop loss.
Note that like regular stop loss orders, you may only set a trailing stop loss order in MT4 if you set a pending entry order, or have an existing open order.
Here’s how to set a trailing stop loss in MT4:
- Open up your MT4 Terminal window (Ctrl+T) and click on the ‘Trade’ tab
- Right-click the trade upon which you wish to set the trailing stop loss
- In the context menu, hover over ‘Trailing Stop’ and select the number of points for your trailing stop order, or select ‘Custom…’ to enter a custom number of points
- Voila! Your MT4 trailing stop order has been set
Important notes about MT4 trailing stop orders
- If you set a trailing without a regular stop loss, you assume the risk of a large loss.
This is because the trailing stop loss will only kick in after prices have moved a certain number of pips (that you've specified) in your favour.
If the market price moves against your position before the trailing stop loss order is triggered, you are essentially trading without a stop loss.
Thus, always consider setting a regular (fixed) stop loss when entering a trade, even if you set a trailing stop loss with it.
- The trailing stop loss is a local function of your MT4 platform.
This means that the trailing stop loss will keep working only if your MT4 platform is running. If you turn off your computer or shut down MT4, the trailing stop loss function stops working.
- In most MT4 platforms, one point equals 0.1 pips.
So if you wish to set a 20 pip trailing stop loss for example, be sure to set it at 200 points.
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