How I apply a trailing stop loss on Bybit | what is a trailing stop loss? (Class 16)

Summary

This video tutorial demonstrates the strategic application of trailing stop losses in profitable trades. It explains the importance of not applying trailing stop losses to all trades and emphasizes the benefits of capitalizing on favorable market movements. The presenter illustrates how to set a trailing stop loss to maximize profits during a price decline, using a practical example of a short position that has already gained nearly 100 in profit. The tutorial also covers the calculation of price retracement percentage to determine the optimal settings for a trailing stop loss.

Takeaways

• 📉 The video explains how to apply a trailing stop loss to maximize profits on winning trades in the futures market.
• 💰 It emphasizes that trailing stop loss is not applicable to all trades and should be used wisely to avoid unnecessary losses.
• 🔍 The speaker discusses the importance of analyzing market movements to determine when to use a trailing stop loss.
• 🚀 The concept of a trailing stop loss is introduced as a tool to take advantage of favorable price movements, especially in a downtrend.
• 📈 The video provides a step-by-step guide on setting up a trailing stop loss, including calculating the percentage of price retracement.
• 🤔 It highlights the need to understand market dynamics and not to apply trailing stop loss indiscriminately to avoid premature trade closures.
• 📊 The speaker uses the example of trading 'luna' before a crash to illustrate the effectiveness of a trailing stop loss in capturing profits.
• 🛑 The video demonstrates how to set a trailing stop loss order, specifying the conditions under which an automatic sell order is triggered.
• 📌 The importance of allowing for market breathing room, or enough price fluctuation, before the trailing stop loss is hit is discussed.
• 📝 The script outlines the process of measuring from the opening to the closing of a trade to determine take-profit points and stop loss levels.
• 🔢 The viewer is guided on how to calculate and input the retracement amount or percentage for the trailing stop loss in their trading platform.

Q & A

What is the main topic of the video?

The main topic of the video is how to apply a trailing stop loss within winning trades in the futures market.

What is the purpose of applying a trailing stop loss in a trade?

The purpose of applying a trailing stop loss is to take advantage of the price movement in your favor, particularly when the market is moving in the predicted direction, and to secure profits without manually closing the trade.

Why is it not recommended to apply a trailing stop loss to all trades?

It is not recommended to apply a trailing stop loss to all trades because it may lead to premature closure of trades that could potentially yield higher profits if held longer.

What is the significance of the 50 to 200 profit range mentioned in the script?

The 50 to 200 profit range signifies the potential profit margins that the speaker typically aims for in a single trade, emphasizing the importance of capitalizing on favorable market movements.

What does the term 'trailing stop loss' mean in the context of trading?

A 'trailing stop loss' is a type of order that moves with the market price, allowing a trade to remain open and continue to profit as long as the price moves in a favorable direction, but automatically closing the trade if the price retraces by a specified amount.

How does the trailing stop loss allow for market retrace?

The trailing stop loss allows for market retrace by setting a buffer zone or percentage of price movement that must occur before the stop loss is triggered, thus providing room for the market to fluctuate without closing the trade prematurely.

What is the difference between a normal stop loss and a trailing stop loss?

A normal stop loss is a fixed price at which a trade is automatically closed if the market moves against the trader's position. A trailing stop loss, on the other hand, is dynamic and adjusts with the market price, only closing the trade if the price retraces by a specified amount from its best level.

How does the speaker determine the appropriate percentage for the trailing stop loss?

The speaker determines the appropriate percentage for the trailing stop loss by analyzing the market conditions and the price movement, ensuring that the market has enough room to fluctuate without triggering the stop loss too early.

What is the role of analysis in determining when to apply a trailing stop loss?

Analysis plays a crucial role in determining when to apply a trailing stop loss by identifying market trends, support and resistance levels, and other factors that can influence the decision to use a trailing stop loss to maximize profits.

Can you provide an example of how the speaker applies a trailing stop loss in a trade?

The speaker provides an example where they have a short position that is currently in profit. They apply a trailing stop loss by setting a condition that if the current trading price drops by 2 percent, the system will trigger an automatic selling stop loss.

What is the importance of understanding the market's retracement behavior when using a trailing stop loss?

Understanding the market's retracement behavior is important when using a trailing stop loss because it helps to set an appropriate retrace percentage that allows the trade to continue profiting from market movements without being closed out too early due to minor price fluctuations.