HOW TO USE STOP LOSS EFFECTIVELY ON BITMEX

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If you have been wondering how to use trailing stop loss on BitMEX and reduce profit losses then you aren’t alone. You are just one of a million enthusiastic forex traders who have become tired of constantly monitoring their trade process in a bid to prevent loss of profit or even total loss of trade.

 

With a stop loss other, you can set automatic trade limits this ensuring that your trades don’t fall under a certain margin. With trailing stop loss it gets even better as you can set this margin to move up with your profit, therefore, making sure that you don’t lose any profits you’ve made already while allowing you to gain more.

This, trailing stop loss basically lets you walk away with whatever you have already while allowing you to earn more if the market appears favorable

 

HOW TO USE TRAILING STOP LOSS IN BITMEX TRADE

Setting up trailing stop loss in BitMEX is as simple as three little clicks, but even though the steps appear easy and simple you need a grounded understanding of how it works and how it affects your trading in general.

To understand stop loss others it will be nice to understand how the market works away from all the charts and logistics. So in this article we will be breaking down the forex market in a bid to view is as a conventional market for better understanding, but for now, let us first five into its meaning and how exactly it works.

 

 

WHAT IS A TRAILING STOP LOSS

 

A trailing stop loss is a type of stop order that follows your market profit or closes your market to stop an impending loss when setting to a defined percentage or dollar amount away from a security’s current market price. For a long position, an investor places a trailing stop loss below the current market price. For a short position, an investor places the trailing stop above the current market price.

 

A trailing stop is designed to protect gains by enabling a trade to remain open and continue to profit as long as the price is moving in the investor’s favor. The order closes the trade if the price changes direction by a specified percentage or dollar amount.

 

You’re thinking:

 

“It doesn’t work.”

 

“I’ve used it before but the market always hit my stop loss before it trends.”

 

That’s because:

You have the wrong expectations about riding a trend

You’re using the wrong trailing stop loss technique

Your trailing stop loss is too tight

 

 

Have you ever wondered how professional traders ride big trends?

 

You know the type of trend that keeps going higher and your profit keeps snowballing while you do nothing.

 

Well, the secret is this…

 

They are using the trailing stop loss technique I’m about to show you below.

 

The problem with the conventional trailing stop loss techniques you are using is;…..

 

….YOU. Yes you heard me….it’s YOU

 

You have the wrong expectations about riding a trend

You’re using the wrong trailing stop loss technique

Your trailing stop loss is too tight

But don’t worry.

 

I’ll teach you how to fix all these and more in today’s post.

 

This is how a trailing stop loss looks like:

 

 

Here’s a trailing stop example:

You bought ABC stock for $100 and your trailing stop loss is $10.

This means if the price goes higher to $120, your trailing stop loss is at $110 (120–10).

And you’ll exit the trade if the price drops to $110.

 

See how it works?

 

Now you might be wondering…

 

WHY USE A TRAILING STOP LOSS?

 

Let’s be honest.

You and I both can’t predict how long a trend will last.

But what you can do is, use a trailing stop loss and take what the market offers you.

 

DISADVANTAGES OF TRAILING STOP LOSS

 

Now here’s the truth:

 

Most of the time (even if you use a trailing stop loss), you’ll not ride a trend.

Also, it’s common to watch your winners turn into losers — as the price moves in your favor and then hit your trailing stop loss.

This causes many traders to give up and they’ll claim “it doesn’t work”.

 

But here’s thing…

 

If you can endure the emotional swings, you’ll eventually catch a huge trend — possibly achieving a 1 to 20 risk to reward or more.

And this is something most traders never get to experience because “it doesn’t work” for them.

 

Next…

How To Trail Your Stop LOSS WITH MOVING AVERAGE

The Moving Average is an indicator that averages out the past prices and shows it as a line on your chart.

 

You can use it to identify the trend, filter out the “noise”, etc.

If you want to learn more, go check out The Moving Average Indicator Strategy Guide.

But for now, let’s learn how to use it to trail your stop loss.

 

Here’s how:

 

Decide on the type of trend you want to ride

Use the appropriate Moving Average

Exit when the price closes beyond it

This means if you want to ride a short-term trend, you can trail your stop loss with a 20-period Moving Average (MA) — and exit your trade if the price closes beyond it.

 

An example:

 

 

Pro Tip:

 

You can use the 50-period MA to ride the medium-term trend and the 200-period MA to ride the long-term trend.

 

HOW TO USE THE AVERAGE TRUE RANGE INDICATOR TO ENORMOUS BIG TRENDS

 

Have you seen traders use a fixed 20 pip trailing stop loss?

 

It’s a joke.

 

Because it doesn’t consider the volatility of the markets.

Imagine having a 20 pip stop loss when the market swings an average of 200 pips a day.

It’s like flushing money down the toilet bro.

 

So, what’s the solution?

 

You can use the Average True Range (ATR) indicator to set a volatility-based trailing stop.

 

Here’s how it works…

 

Decide on the ATR multiple you’ll use (whether it’s 3, 4, 5, etc.)

If you’re long, then minus X ATR from the highs and that’s your trailing stop loss

If you’re short, then add X ATR from the lows and that’s your trailing stop loss

To make your life easier, there’s a useful indicator called “Chandelier stops” (From TradingView) which performs this function.

 

Pro Tip:

 

You can use 2 ATR to ride the short-term trend, 4 ATR for medium-term trend, and 6 ATR for a long-term trend.

 

You don’t need a chart to trail your stop loss, here’s how…

Decide on the trailing stop loss percentage where you’ll exit the trade.

It can be 10%, 20%, or whatever you decide.

 

For example:

 

If you buy ABC stock at $100 and have a trailing stop of 10%.This means if ABC stock drops 10% (from its high), you’ll exit the trade.

 

An example:

 

Pro Tip:

 

This technique is useful when trading a portfolio of stocks with equal weight for each position. The zero indicator method to trail your stop loss

You know an uptrend consists of higher highs and lows.

 

This means you can use the swing low to trail your stop loss because if the trend holds, it shouldn’t close below it.

 

Here’s how to do it:

 

Identify the previous swing low

Set your trailing stop loss below the swing low

If the price closes below it, exit the trade

 

An example…

Pro Tip:

 

The market tends to “hunt” stop losses below Support or swing low.

To avoid it, set your stop loss 1 ATR below the market structure.

 

How to trail your stop loss when the market goes “crazy”

What do I mean by “crazy?”

 

It’s when the market goes parabolic in one straight line (like a rocket taking off).

 

For example:

But here’s the thing:

Parabolic moves are not sustainable. It’s a matter of time before the market reverse and COLLAPSE.So, in market conditions like these, you want to trail your stop-loss tightly.

Don’t give it too much room to breathe because you want to “run” at the first sign of cracks.

 

 

SO, HOW DO YOU DO IT?

 

Identify the timeframe of the parabolic move

Trail your stop loss on the previous candle low

Exit if the price breaks and close below it

 

Here’s an example:

 

As you can see, this technique got you out of Bitcoin at $17,000 — and avoided the collapse.

 

HOW TO CAPTURE A SWING AND RIDE MASSIVE TRENDS (at the same time)

Here’s the thing:

 

There’s no rule saying you must either capture a swing or ride a trend.

Instead, you can do both!

This means you have the consistency of a swing trader plus, the ability to ride big trends (like a Trend Follower).

 

So, how does it work?

 

Simple.

You exit a portion of your trade at a fixed target and let the remaining ride the trend.

 

Here’s an example

Partial take profits on EUR/USD Weekly:

 

Now, there are two things to consider…

 

How many units do you sell at your fixed target?

How will you manage the remaining units?

Let me explain…

 

  1. HOW MANY UNITS DO YOU SELL AT YOUR FIXED TARGET?

 

Here’s the thing:

If you sell too little units, it becomes a Trend Following trade.

And if you sell too much, it becomes a swing trade.

For starters, you can sell 50% of your position at the first target and keep the remaining to ride a trend.

 

Once you’re proficient with this technique, you can “play around” with the percentage to suit your goals.

 

  1. HOW WILL YOU MANAGE THE REMAINING UNITS?

 

You’ve hit your first target profit, hurray!!

 

What now?

 

Will you attempt to ride a trend or have a second target profit?

If you have a second target profit, where will it be?

 

If you want to ride a trend, how will you trail your stop loss?

Clearly, those are questions only you can answer (and it depends on your goals and personality).

 

So think about it.

Now you might be wondering…

 

Which is the best strategy to trail your stop loss?

I’ll be honest.

 

There’s no best trailing stop strategy. Because it depends on what YOU want from your trading.

 

For example:

 

To ride a short-term trend, you can trail with 20-period MA, 2 ATR, etc.

To ride a medium-term trend, you can trail with 50-period MA, 4 ATR, etc.

To ride a long-term trend, you can trail with a 200-period MA, 6 ATR, etc.

 

Do you see my point?….

 

The most important question to ask is…

What’s the type of trend you want to capture?

Then use the right technique to achieve your goal.

 

Conclusion

A trailing stop loss is an order that “locks in” profits as the price moves in your favor

You can trail your stop loss using: Moving Average, Average True Range, percentage change, market structure, and weekly high/low

There’s no best method to trail your stop loss. Instead, ask yourself what’s type of trend you want to capture and then use the right technique for it.

 

Thanks for reading my blog post, see you in the next one.

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