Trailing Stop

The  CFD  Trading Stop, also called “Trailing Stop”, is a function that automatically optimizes the Stop Loss level, updating it in case the price moves favorably to its forecast.

Before continuing, we would like to point out that Trading Stop is not available on all platforms. One platform that it can be found on is  Plus500  , which can be  accessed from here  .

We then continue with the lesson, illustrating the details related to the operational shutdown.

What is the CFD trailing stop for?

To better understand how stop trading CFDs works, you need to understand what it is for.

Suppose you open a trade position and set a stop loss that automatically closes the position if the losses reach a certain level.

In the event that the market moves in our favor  , wouldn’t it be great if the Stop Loss level moves towards it, updating the price bar set for the stop loss?

And that’s why the Operational Stop was designed.

Practical example with Trailing Stop

CFD Stop Trading is more easily understood through an  example  .

Suppose that the price of an asset is equal to 100 and we want to open a trade position of the type Long, or “Buy”. We set the Stop Loss at 90, so if the price falls and reaches 90, the position will be closed automatically.h

But if the price goes up, how could we make better use of our trade? Easy: use Operational Stop.

With the Trade Stop, you can make the Stop Loss go up in case the buy position generates profits  . In practice, going back to the example, the trading stop could be set in such a way that if the price reached 110, the stop would also go from 90 to 100.

In the event that the price reaches 150, the Stop would reach 140. This means that the Stop will have been adjusted but that it could also close the position in profit and not only in loss.

All of this also applies to short, or “sell,” positions that are traded on the basis of the asset’s downside forecast.

How to apply the Operating Stop on the platform

First of all, it must be said that not all trading platforms offer the possibility of applying a trailing stop. This is a function present in the best trading platforms, among which we highlight the eToro platform   .

After selecting an asset and clicking on the position type to open, a window appears in which to configure the order details. In addition to Stop Loss and Stop Limit, there are advanced features, including operational stop.

For our example, we click “Buy” for the EURUSD asset (with  CFDs that track the performance of the EURUSD).

We have constituted 20 shares, for a required margin of 196.36 euros (which will be deducted from the capital available to open the position). Then, by clicking on “Advanced”, the Trade Stop, expressed in Pips, is displayed. 133 pips, in this case, equate to a loss of 28.26 euros. For convenience, leave the pips alone and trust the stake already expressed in euros.

This means that the stop, set at 133, will close the position when the loss reaches € 28.26.

In the event that the market moves up, the CFD Trading Stop would also adjust, rising and always maintaining the same level of difference between the current rate and the maximum level of loss with respect to it.

So, ultimately,  the Trade Stop is a stop that varies according to the current rate and adjusts to it, in the event that the market moves in the favorable direction.

Proceed to the next lesson: Pre-order in CFD trading.

Frequently asked questions about stopping CFD trading

What is the operational stoppage?

It is a stop that updates automatically, optimizing the stop loss applied to a position that continues to gain. 

Where is the commercial stop established?

In the order window. Not all platforms have this feature. 

How is the Trading Stop configured?

In the corresponding box within the order window, specifying the pips. 

What is the difference between Stop Loss and Operational Stop?

The Operational Stop is updated automatically, while the Stop Loss is fixed.