What is a trailing order?
A trailing order is a Stop order the rate of which can automatically change at market movements (i.e. the order which tracks the market). The order rate changes so that the distance between it and the current rate would not exceed a specified value called a trailing distance. It means the order rate changes only if the market price moves away from the order rate. It is constant if the market moves towards the order.
What are the parameters to manage trailing?
There are two parameters for trailing management: a trailing distance and a trailing step.
The trailing distance sets a distance the order rate follows the market at.
The trailing step sets a minimum excess of a distance between the current rate and order rate to that of the trailing necessary for the trailing realization. As long as the difference between the market-to-order distance and that of the trailing makes less than one step, there is no rate shift. So, trailing works not for every quote, but only when the distance between the market and order exceeds the trailing distance one step or more.
What for is a trailing step?
The trailing step determines how often the trailing will be performed, i.e. the trailing frequency. The larger the step, the less frequently the trailing takes place. For example, trailing with a step of 10 will be triggered every time the current rate-to-order distance is 10 points above that of the specified trailing. That is, the current rate should pass at least 10 points from the previous trailing point (the order rate change). It is the final change of the current rate from the previous trailing in the direction you need that is considered only, no rate fluctuations matter.
How does trailing function?
If the market moves towards the order (the distance between the market and the order decreases), the order rate remains unchanged.
When the market moves off the order, if the distance between the market and order exceeds the trailing distance one trailing step or more, the order rate will change so that to get this distance equal to that of the trailing. The market moving on off the order, the next change in the order rate will take place when the rate covers the trailing step distance from the previous trailing point.
Thus, trailing maintains the distance between the order rate and the current rate at a trailing distance. This distance can also reach a trailing distance plus trailing step value.
The example below shows how trailing works.
Say, there is an open position of Buy 10,000 at the rate Rb = 1.2500.
A Sell 10,000 Stop order with the rate Ro = 1.2450 is placed to limit a possible loss. It means the maximum loss is limited to 50 points. The order has a trailing with a distance of 50 and step of 10 enabled.
If the current rate Rc goes down and reaches the value of 1.2450, the order will be executed, that is a Sell deal will be executed at this rate. The position will close with a 50 points' loss. When the current rate moves towards the order, the trailing does not matter.
If the current rate starts moving off the order, the rate of the Stop order with
an activated trailing may change.
For instance, the current rate went up and reached the level of 1.2510, i.e. the distance between the current rate and the order rate (60 points) became greater than or equal to the trailing distance + step (50 + 10 = 60 points). In this case, the order rate will change so that to maintain the 50 points' distance from the current rate Rc:
Ro = 1.2510 - 50p. = 1.2460
If the market keeps moving off the order, the next change in the order rate will occur after the current rate passes 10 points from the last trailing point (1.2510) and reaches the value 1.2510 + 10p. = 1.2520.
This will take place every time the market moves another 10 points away from the order.
Assume that Rc went on rising and reached the level of
1.2560. The trailing will change the order rate Ro
to keep the 50 points' distance:
Rc = 1.2520 -> Ro = 1.2520 - 50 = 1.2470
Rc = 1.2525 -> Ro = 1.2470 (it is unchanged, as Rc moved for 5 points, i.e. less than one trailing step)
Rc = 1.2530 -> Ro = 1.2530 - 50 = 1.2480
Rc = 1.2540 -> Ro = 1.2540 - 50 = 1.2490
Rc = 1.2550 -> Ro = 1.2550 - 50 = 1.2500
Rc = 1.2560 -> Ro = 1.2560 - 50 = 1.2510
In this instance, the order is already in the "breakeven zone" regarding the open position. That is, if the rate Rc makes a move towards the order and reaches 1.2510, the order will be executed. Together with it the Sell 10,000 trade is effected, closing thus the position at a 10 points' profit.
If Rc keeps on moving up and reaches the level of 1.2623,
the trailing will change the rate order to as much as 1.2570 by the moment.
If the current rate turns now and drops to 1.2570, the position will close
at a 70 points' profit at the order execution.
What happens if the rate fluctuates at some value?
As long as the distance between the current rate and the order rate is within the trailing distance + trailing step, the trailing order rate remains unchanged.
How can one manage trailing in the TradeRoom system?
Trailing in the TradeRoom is activated, or deactivated, in the Order editing form with the help of the Trailing option. When the option is on, you can also set a distance and a step here. You can do this at any time, for any Stop order. Trailing cannot be activated for a Limit order, as it will never be executed.
Trailing for Stop orders placed on the
Forex Trading page can be activated at an order placement, with the option
in column "Trailing". In this case, the standard values are set: the trailing
distance equals to the distance between the order rate and current rate at the
order placement whereas the trailing step is set equal to a minimum step. You
can always modify the parameters at an order editing.
The default state of the Trailing option column is set in the Trading Preferences with the help of the "Activate trailing for Stop orders" option.
What happens if the distance between the order rate and that of the market is less than the trailing distance at the trailing enabling?
In this case the order rate remains unchanged until the trailing condition is fulfilled, i.e. until the distance between the order rate and the current rate does not exceed the value of the trailing distance + trailing step. After that, the trailing takes place as usually.
What happens if the distance between the order rate and that of the market is more than the trailing distance at the trailing enabling?
The trailing will be performed at a quote receipt, in case its condition is fulfilled. That is, if the distance between the order rate and the current rate will be more than the value of the trailing distance + trailing step. Particularly, the condition may be fulfilled immediately at the first quote after you have saved your order.
What happens at editing order parameters?
Upon the order saving, the trailing will be performed with new parameters as it is described above:
If the distance between the order rate and that of the market is less than the trailing distance.
If the distance between the order rate and that of the market is more than the trailing distance.
Should the TradeRoom system run for trailing to work?
Trailing is carried out on the server so it does not depend on the TradeRoom running in the client's computer. You can start, or exit, the TradeRoom as the case may require. Just be careful when you edit the trailing order since its rate can change on the server even while editing. Therefore, to preserve the trailing results, the order rate is updated only if you modify it on edit. Only in this case the order rate will be replaced on the server with a new one. In the event the editing form rate is unchanged, the server saves the last order rate value trailed.