Trailing Stop Order Explanation

I. What Is a Trailing Stop?

A trailing stop is a dynamic risk management tool that allows users to automatically “track” profits as the market price moves in a favorable direction, and automatically close positions when the market moves in the opposite direction and reaches a preset threshold.

Compared with traditional take-profit and stop-loss orders, a trailing stop features “profit locking and dynamic adjustment,” which not only helps protect existing gains but also allows users to further expand profits and reduce the need for frequent market monitoring.

II. Core Logic of the Trailing Stop

Applicable only to closing existing positions:

A trailing stop is not used for opening positions. It can only be applied to closing orders for positions that are already open.

Following favorable price movements:

The system starts working after the market price reaches a specific “activation price,” and automatically raises or lowers the stop price as the price continues to move in a favorable direction.

Retracement triggers market-price closing:

Once the market price retraces from a peak (or a trough) in the opposite direction, and the retracement reaches or exceeds the preset retracement rate (percentage), the system will automatically submit a market order to close the position, locking in profits or limiting losses.

III. Key Parameter Descriptions

IV. Execution Conditions for Trailing Stops

1. Long Position (Bullish)

For a long position, the activation price must be higher than the latest market price.

Once the market price reaches the activation price, the trailing stop price increases by a specific percentage.

That is, after the order is triggered and the market price rises, the trailing stop price also rises accordingly and forms a new trailing stop price.

When the price falls, the trailing stop stops tracking.

If the latest traded price falls from the highest price by more than the preset retracement range and reaches the latest trailing stop price, the position will be immediately closed by a market sell order.

2. Short Position (Bearish)

For short trades, the activation price must be lower than the latest market price.

Once the market price reaches the activation price, the trailing stop price decreases by a specific percentage.

After the order is triggered and the market price declines, the trailing stop price also declines accordingly and forms a new trailing stop price.

When the price rises, the trailing stop stops tracking.

If the latest traded price rebounds from the lowest price by more than the preset retracement range and reaches the latest trailing stop price, the position will be immediately closed by a market buy order.

A trailing stop will only be executed as a market order when both conditions are met simultaneously: the activation price is triggered and the preset retracement rate is reached.

V. Common Usage Scenarios and Examples

Scenario 1: Profit Protection for Long Positions

Opening price: $30,000

Market price rises to: $32,000

Activation price: current price

Retracement rate: 5%

If the market continues to rise to $35,000, the system will dynamically adjust the take-profit price to $33,250.

When the price retraces to $33,250, the position will be automatically closed at market price, locking in profits.

Scenario 2: Drawdown Control for Short Positions

Opening price: $30,000

Current price: $35,000 (floating loss)

Activation price: $32,000

Retracement rate: 5%

If the market price falls to $32,000 and continues to decline to $31,000, the system sets the stop-loss price at $32,550.

If the price rebounds to $32,550, the system closes the position to reduce losses.

Scenario 3: Coexisting with Traditional Take-Profit and Stop-Loss Orders

Opening price for a long position: $30,000

Current market price: $30,100

Settings:

Traditional stop-loss price: $28,500

Trailing stop activation price: current price

Retracement rate: 5%

When the price rises to $30,500, the trailing stop price is set as:

$30,500 × (1 − 5%) = $28,975

If the price later falls to $28,975, the trailing stop takes effect, the system closes the position, and the traditional stop-loss order is automatically canceled.

VI. Setup Recommendations and Risk Warnings

Tips for selecting the activation price:

For long positions, it should be set above the current price to avoid false triggers;

For short positions, it should be set below the current price to wait for retracement confirmation;

The “latest price” option can be selected for automatic activation to respond to real-time market conditions.

Recommended retracement rates:

Notes:

If the retracement rate is too low → it may be triggered by normal market fluctuations, resulting in premature exits;

If the retracement rate is too high → profits or losses may not be closed in time, potentially increasing losses.

VII. Advantages of Use

Continuously tracks profits and locks in achieved gains;

No need for frequent market monitoring, suitable for users who cannot watch the market 24/7;

Intelligently responds to price trend reversals, helping to automatically take profits;

Compatible with traditional take-profit and stop-loss orders, offering more flexible strategies and more robust protection.

VIII. Summary

Trailing stops are an important risk management tool provided by the iCoin platform. They are particularly suitable for users who want to “capture the full profit of a trend” or “flexibly manage take-profit and stop-loss orders” in highly volatile markets.

By reasonably setting the activation price and retracement rate, users can effectively control risk, extend profits, and protect their principal. Users are advised to flexibly adjust settings based on actual market conditions, position size, and risk tolerance, and to regularly check the status of current orders to avoid order failures caused by setting conflicts or position changes.