If you are new to Binance trading App, the Binance Trailing Stop will help you protect gains to maximize your profits.
In this step by step tutorial, you will learn how to easily take advantage of this feature to help grow your trading account.
Table of Contents
What is Binance Trailing Stop?
When the market swings, a trailing stop order enables traders to put a pre-determined order at a certain percentage distant from the current price.
Trading using trailing stop orders enables traders to place an order at a predetermined percentage away from the market price when the market moves in their favor.
It assists traders in limiting their losses and preserving their profits when a transaction does not go in the direction that traders deem unfavorable at the time of the deal.
When the price advances in a favorable direction, the trailing stop moves by a predetermined percentage (called the Callback rate).
By allowing a transaction to stay open and profitable for the duration of time that the price is going in the direction that traders want, it locks in profits.
The following stop does not reverse direction and does not go backward. Whenever the market price changes in the other direction by a preset percentage (Callback rate), the trailing stop will close/exit the position at the current market price.
How To Use Binance Trailing Stop?
In reality, the trailing stop order feature is only available in the Futures part of the Binance platform.
Furthermore, you must take advantage of the updated version of the Website. However, trailing stop orders only supported by the most recent version of the trading interface.
If you are now seeing the Old Version, you must click on the icon labeled “New Website,” as shown in the illustration below.
How to Enable Trailing Stop Order?
As soon as you get to the New Website, you must place your cursor over the triangle next to “Stop Limit” and choose “Trailing Stop.”
As you can see in the screenshot below, things have changed.
How Does Binance Trailing Stop Works?
Traders may put a trailing stop order when initiating a trade for the first time, but this is not the usual practice.
The trailing stop order may also put as a reduce-only order with the goal of decreasing or closing an open position, as well as other things.
In the case of a LONG trade, a sell trailing stop order you should place the order above the point of entry into the trade. The trailing stop price rises by a trailing percentage point each time the trailing percentage point reached (Callback rate).
When the price begins to rise, a new trailing stop price will establish. When the price falls, the trailing stop becomes immobile and does not move anymore.
If the price travels more than the preset callback rate from its peak price and hits the trailing stop price, a sell order will issue. The transaction will complete with the execution of the sell order at the current market price.
A “buy” trailing stop order is the inverse of a “sell” trailing stop order in terms of functionality.
In the case of a SHORT trade, a purchase trailing stop order will placed below the entry point of the transaction. The trailing stop price decreases by a percentage of the trailing percentage (Callback rate).
When the price begins to drop, a new following stop price will establish.
When the price rises, the trailing stop becomes inactive and stops moving.
If the price advances more than a specified callback rate from its lowest price and reaches the trailing stop price, a purchase order will issue. It will be necessary to close this transaction with a purchase order at market price.
The extent to which a trailing stop price will lag the price is determined by the callback rate. The “Callback Rate” box allows you to manually enter a rate in the range of 0.1 percent to 5 percent. The rate range is accessible from 0.1 percent to 5 percent.
Alternatively, fast choices such as “1 percent” and “2 percent” are accessible for choosing in a short amount of time.
Market participants have the option of filling in the price level that activates the trailing stop.
If no activation price is available, the market price will use as the default activation price (which may be either the “Last Price” or the “Mark Price” depending on the trigger type selected).
For a purchase trailing stop order (SHORT POSITION) to be successful, it must be placed with an activation price that is less than the current market price.
In order to satisfy the requirement, the market’s lowest price must hit the activation price at the same time. Unless the price falls below the Activation Price, the Trailing stop order will not activate and will not function.
In contrast (LONG POSITION), in order to place a sell trailing order, the activation price must be greater than the current market price at the time of the order.
In order to satisfy the requirement, the highest price on the market must be more than the activation price. If the price does not rise over the Activation Price. The Trailing stop order will not activate and will remain inactive.
It is necessary to utilize the activation price in order to begin trailing stop loss/take profit only when a price condition is reliable.
In order to safeguard your trade in the event that the trailing stop loss does not satisfy your Activation price condition. If you place an Activation price order, you will almost certainly need to put a Stop loss order as well.
It is usually self-evident that the trailing stop loss happens to reduce or close your trade. Rather than to create a new position when you utilize it. As a result, in the Advanced section, you must enable the flag “decrease only-trigger.”
In my opinion, it might be helpful as a default flag, but in reality, it is not!
Advanced features include the reduce-only trigger flag as well as the kind of trigger (Last Price and Mark Price)
The type of trigger
For the trigger, traders may choose between the “Last Price” (the default) or the “Mark Price” option.
If traders choose “Mark Price” as a trigger, the trailing stop will triggered when the Mark Price reaches or exceeds the activation price. Even if the Last Price does not reach the activation price at that time.
Please keep in mind that Binance utilizes the Mark Price as a trigger for liquidation. As well as a metric for calculating unrealized profit and loss.
The Mark Price is usually just a few cents more than the Last Price at the time of purchase. During periods of severe price fluctuation, the Last Price. On the other hand, may vary substantially and significantly from the Mark Price.
As a result, please keep an eye on the price difference between the Last Price and the Mark Price. If you would want to alter the Trigger from Mark Price to Last Price or vice versa. You may always cancel the order you have made and make a new order to replace it.
Conditions Associated with Trailing Stop
Please keep in mind that there are two criteria for the activation of the trailing stop order. Which are the activation price and the callback rate.
Both of these conditions must meet in order for the trailing stop order to activated and issued as a market order to close or exit the position.
A sell trailing stop order (LONG TRADE) will be placed if the conditions are met as follows:
- Activation Price <= Highest Price and
- Rebound Rate >= Callback Rate
A buy trailing stop order (SHORT TRADE) will be placed if the conditions are met as follows:
- Activation Price >= Lowest Price and
- Rebound Rate >= Callback Rate
How Trailing Stop Differs From Trailing Loss Order?
Using a stop-loss order to assist minimize losses, while using a trailing stop order to lock in profits while also limiting losses is beneficial.
However, unlike trailing stop orders, which are more flexible and follow the direction of the market automatically. Stop-loss orders are fixed and must be manually adjusted.
How to Use Binance Trailing Stop – Pro-Tip
Calculating the optimum callback rate and activation price may be challenging.
To be successful, a trailing stop should have a callback rate that is neither too low nor too high and an activation price that is neither too near nor too far away from the current price.
When the callback rate is set too low or the activation price is set too near to the entry price. The trailing stop gets too close to the entry price and easily trigger by typical daily market fluctuations.
There is no space for a transaction to swing in a trader’s favor prior to any significant price movement. The transaction will close/exit at a time when the market has had a brief drop. And subsequently rebounded, resulting in a loss.
So, this was all about how to use Binance Trailing Stop. If you have anything in mind relating to Binance Trailing Stop, feel free to share with all of us.