I opened three trades last Friday and Monday and all closed in profit. However, all three were closed when my trailing SL was hit.
AUDJPY
Profit = 38 pips.
A textbook pinbar formed around resistance on Friday's close. I decided to put a pending short on the break of the pinbar, which was triggered on Monday. My TP was the next level of support below it.
For this trade, I decided to use a trailing SL equal to 50% of TP. Essentially, once my trade is halfway towards my target, my SL would move to breakeven, making the trade riskless. Any further movement in my favour would pocket some pips.
However, there is always the chance of a retracement taking out my trailing SL before price reaches TP. This is precisely what happened, if you look at action over the 4HR time chart. My SL was hit, and then downward movement continued.
Daily Chart:
4HR Chart:
GBPUSD
Profit = 49 pips.
It's a similar story with the GBPUSD. My trailing SL was hit, but retracement has been much more significant. Price fell short of my TP by about 7 pips before reversing and hitting my trailing SL.
Silver
Profit = 20 pips.
Price moved a little over halfway towards support before retracing and knocking out my trailing SL. My profit was about 20 pips. Since then, price has begun moving downward again. My belief is that it will continue to trend downwards but anything can happen.
Thoughts
Trailing stop losses do increase your vulnerability to retracements, but it also minimises your losses if price truly turns against you and converts a losing trade into a (slightly) profitable one. A trailing stop loss also helps to maintain a reasonable R:R ratio as price moves towards your take-profit target.
Suppose we look at the following USDCHF chart and decide to trade the pin bar formation. If we use a static stop loss and price moves towards our take-profit, you'll see that our risk expands while our reward shrinks. A trailing SL will move our SL as price moves in our favour, helping to keep our R:R in check.
AUDJPY
Profit = 38 pips.
A textbook pinbar formed around resistance on Friday's close. I decided to put a pending short on the break of the pinbar, which was triggered on Monday. My TP was the next level of support below it.
For this trade, I decided to use a trailing SL equal to 50% of TP. Essentially, once my trade is halfway towards my target, my SL would move to breakeven, making the trade riskless. Any further movement in my favour would pocket some pips.
However, there is always the chance of a retracement taking out my trailing SL before price reaches TP. This is precisely what happened, if you look at action over the 4HR time chart. My SL was hit, and then downward movement continued.
Daily Chart:
4HR Chart:
GBPUSD
Profit = 49 pips.
It's a similar story with the GBPUSD. My trailing SL was hit, but retracement has been much more significant. Price fell short of my TP by about 7 pips before reversing and hitting my trailing SL.
Silver
Profit = 20 pips.
Price moved a little over halfway towards support before retracing and knocking out my trailing SL. My profit was about 20 pips. Since then, price has begun moving downward again. My belief is that it will continue to trend downwards but anything can happen.
Thoughts
Trailing stop losses do increase your vulnerability to retracements, but it also minimises your losses if price truly turns against you and converts a losing trade into a (slightly) profitable one. A trailing stop loss also helps to maintain a reasonable R:R ratio as price moves towards your take-profit target.
Suppose we look at the following USDCHF chart and decide to trade the pin bar formation. If we use a static stop loss and price moves towards our take-profit, you'll see that our risk expands while our reward shrinks. A trailing SL will move our SL as price moves in our favour, helping to keep our R:R in check.
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