Trailing Order for Opening Positions
Trailing Orders are designed to capitalize on pullbacks within a trend. They help traders open positions during price corrections in a trending market.
How it Works
Buy Order (Long Position)
Scene: Traders expect the market to continue in an uptrend but want to enter during a price pullback to secure a better entry price.
Mechanism: Set a fixed price gap to trigger the buy order when the price drops by that amount after a rise.
Trigger Condition: The price rises and then pulls back by the specified price gap, triggering the buy order.
Example
- The market price is $20,000, and traders believe the trend is bullish (upward).
- Traders set a price gap of $500.
- As the price rises to $20,800 and then pulls back to $20,300, the buy order is triggered, opening a long position.
Advantage: Helps traders avoid buying at the top by taking advantage of natural pullbacks within an uptrend.
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Sell Order (Short Position)
Logic: Traders expect the market to continue in a downtrend but want to enter during a price rebound for a better entry price.
Mechanism: Set a fixed price gap to trigger the sell order when the price rises by that amount after a drop.
Trigger Condition: The price drops and then rebounds by the specified price gap, triggering the sell order.
Example
- The market price is $30,000, and traders believe the trend is bearish (downward).
- Traders set a price gap of $300.
- As the price falls to $29,000 and then rebounds to $29,300, the sell order is triggered, opening a short position.
Advantage: Helps traders avoid shorting at the bottom by utilizing rebounds within a downtrend.
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Trailing Order Mechanism Summary
| Action |
Trend Direction |
Trigger Mechanism |
| Buy Order (Long) |
Uptrend |
Price rises and then pulls back by the price gap. |
| Sell Order (Short) |
Downtrend |
Price drops and then rebounds by the price gap. |
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Trailing Order vs. Trailing Stop Order
| Feature |
Regular Trailing Stop Order |
Trailing Order |
| Primary Goal |
Enter or exit at market reversal points |
Enter during price pullbacks or rebounds in trends. |
| Buy Logic |
Price drops and then rebounds |
Price rises and then pulls back. |
| Sell Logic |
Price rises and then pulls back |
Price drops and then rebounds. |
| Best Used For |
Capturing trend reversal points |
Capturing trend continuation via corrections. |
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Applications
1. Buy Order (Long Position):
- When the market is in a clear uptrend, avoid chasing the price at the top and use the reverse trailing order to enter during pullbacks.
2. Sell Order (Short Position):
- When the market is in a clear downtrend, avoid shorting during the lowest point and use the reverse trailing order to enter during rebounds.
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Important Notes
1. Price Gap Settings:
- The price gap should not be too small to avoid triggering orders during minor market fluctuations.
2. Market Suitability:
- Ideal for trending markets (uptrend or downtrend) with periodic corrections.
- Avoid using in range-bound markets, where frequent fluctuations could lead to false triggers.
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Summary
The Trailing Order is a powerful strategy for opening positions during trend corrections. For buy orders, it tracks upward trends and triggers during pullbacks. For sell orders, it tracks downward trends and triggers during rebounds. This approach helps traders avoid chasing prices while maximizing opportunities to enter at favorable levels within a trend.