FAQ for Trailing TP/SL

Here are some frequently asked questions about trailing TP/SL to help you understand this strategy better:

1. What is Trailing TP/SL?

Trailing Take Profit and Stop Loss (TP/SL) allows users to preset commissions within a price range of a specific percentage of the market price during market fluctuations.
It helps the trader to limit losses and protect gains when the market moves in a direction that the trader believes is favorable and then pulls back.

When the price moves in a favorable direction, the Trailing TP/SL will simultaneously move by a specific percentage. As long as the price moves in the trader's favor, it keeps the trade open and continues to take profits to lock in gains. Trailing TP/SL will not move in the opposite direction.

2. What Are The Rules of Trailing TP/SL?

In case the user holds a long position, the parameters of the Trailing Take Profit and Stop Loss are set as follows:

Activation price: 9000
Callback Rate: 5%

At this point, as the market fluctuates, the user's Take Profit and Stop Loss orders will change as follows:

• When the market's latest price fluctuations to 9000, the system activates the trailing take-profit stop-loss order, the trigger price = 9000 * (1-5%) = 8550
• If the market continues to rise, when the market price fluctuations to 9500, the highest price, the trigger price = 9500 * (1-5%) = 9025
• If the market falls to 9200, because the highest price is still 9500, and the retracement ratio does not meet the 5%, so the order is still not triggered at this time, the trigger price is still 9025
• If the market rises to 10000, breaking through the original maximum price of 9500, the trigger price = 10000 * (1-5%) = 9500
• If the market falls to 9500, the callback rate is met, the trailing stop loss order is triggered and commissioned to the market at the market price to close position

In case the user holds a short position, the parameters of the Trailing Take Profit and Stop Loss are set as follows:
Activation price: 10000
Callback rate: 5%

At this point, as the market fluctuates, the user's Take Profit Stop Loss order will change as follows:

• When the latest market price reaches 10000, the system activates the mobile take-profit stop-loss order, the trigger price = 10000 * (1 + 5%) = 10500
• If the market continues to fall to 9500, this is the current lowest price, the trigger price = 9500 * (1 + 5%) = 9975
•  If the market rises to 9800, since 9500 is still the current lowest price, the trigger price will remain at 9975, and the order will not be triggered due to the failure to meet the callback ratio of 5%.
• If the market falls to 9200, the original minimum price of 9500 has been broken, so the trigger price at this time = 9200 * (1 + 5%) = 9660
• If the market rises to 9660, the pullback ratio meets 5%, the mobile take profit and stop loss order triggered and entrusted to the market according to the market price to close position.

3. When Can I Use Trailing TP/SL?

We have prepared 2 different scenarios where our users can implement the Trailing TP/SL strategy.

Scenario 1: When a long position is closed in a favorable direction (rise and fall)

Assuming: It's determined that each price rise has a callback rate of no more than 3% based on the recent market movements.

Prediction: Any callback rate of no more than 3% can be considered a normal callback in the near future, and the market will continue to move upward.

On the contrary, a callback rate exceeding a certain value (let's say, 5%) can be interpreted that the bullish momentum has ended (the price rises no further and is likely about to plummet). In this case, the position needs to be closed before the market price plummets.

Current Position: 2 BTC long position

Entry Price: 40,000

Latest Market Price: 42,000

Based on the current market price, estimated unrealized PnL = (42,000 - 40,000) * 2 = 4,000 USDT

So, we set a trailing TP/SL order with the following parameters:

Activation Price: 43,000

Callback Rate: 5%

At this point, when the latest price continues to rise to 43,000, the trailing take-profit stop loss will be activated and calculated at the time of the trigger price [43,000 * (1-5%) = 40,850], and in the market, if the proportion of the retracement reaches 5%, i.e., 40,850, it will be triggered to move the take-profit stop and commissioned to the market at market price to close position.

Now, the profit and loss = (40,850 - 40,000) * 2 = 1700

Scenario 2: When a short position is closed in a favorable direction (fall and rebound)

Assuming: It's determined that each price dip has a callback rate of no more than 3% based on the recent market movements.

Prediction: Any callback rate of no more than 3% can be considered a normal callback in the near future, and the market will continue to move downward.

On the contrary, a callback rate exceeding a certain value (let's say, 5%) can be interpreted that the bearish momentum has ended (the price falls no further and is likely about to rise). In this case, the position needs to be closed before the market price rises quickly.

Current Position: 2 BTC short position Entry Price: 40,000 Latest Market Price: 38,000 Based on the current market price, estimated unrealized PnL = (40,000 - 38,000) * 2 = 4,000 USDT.

So, we set a trailing TP/SL order with the following parameters:

Activation price Price: 36,000 Callback Rate: 5%

At this point, when the latest price continues to fall to 36,000, the trailing take-profit stop loss will be activated and calculated at the time of the trigger price [35,000 * (1 + 5%) = 36,750]. In the market, if the proportion of the pullback reaches 5% (that is 36,750), the trailing take-profit stop loss will be triggered and entrusted to the market at the market price of the market buy to close position.

Now, the profit and loss = (40,000 - 36,750) * 2 = 6500