Trailing stop loss is a risk management technique used in trading to protect profits by adjusting the stop loss level as the price moves in a favorable direction. It involves setting a stop loss order at a certain percentage or price distance away from the current market price, and as the price moves in your favor, the stop loss is automatically adjusted to maintain a specific distance from the highest reached price.
For example, let's say you bought the Nifty 50 18400 call option, and you initially set a stop loss at a certain level, let's say 1.6 times the distance from your entry point. As the price of the option increases, you can trail your stop loss higher, locking in profits and potentially protecting yourself from significant losses if the price reverses.
The specific method and parameters for trailing a stop loss can vary depending on your trading strategy and preferences. Some traders use percentage-based trailing stops, while others may use volatility-based or chart-based methods.
It's important to note that trailing stop loss orders are typically executed automatically by your broker's trading platform, so you need to have a clear understanding of how your platform handles trailing stops and how to set them up correctly.
Remember, trailing stop loss orders can help protect profits, but they are not foolproof, and market conditions can change rapidly. It's always a good idea to monitor your trades closely and make adjustments as necessary based on market conditions and your risk tolerance.
For example, let's say you bought the Nifty 50 18400 call option, and you initially set a stop loss at a certain level, let's say 1.6 times the distance from your entry point. As the price of the option increases, you can trail your stop loss higher, locking in profits and potentially protecting yourself from significant losses if the price reverses.
The specific method and parameters for trailing a stop loss can vary depending on your trading strategy and preferences. Some traders use percentage-based trailing stops, while others may use volatility-based or chart-based methods.
It's important to note that trailing stop loss orders are typically executed automatically by your broker's trading platform, so you need to have a clear understanding of how your platform handles trailing stops and how to set them up correctly.
Remember, trailing stop loss orders can help protect profits, but they are not foolproof, and market conditions can change rapidly. It's always a good idea to monitor your trades closely and make adjustments as necessary based on market conditions and your risk tolerance.