Trailing Take Profit and Stop Loss

Concept and Operation Guide:

What is Trailing Take Profit and Stop Loss?

Trailing take profit and stop loss is a trading strategy used to limit losses and protect profits. It allows users to automatically preset orders when the market price reaches a specific percentage price range. When the market price moves in a favorable direction, the take profit and stop loss price will adjust accordingly, but once the price reverses and exceeds the set percentage, the system will automatically close the position at the market price.

Core Features:

1. Automatic Tracking: When the price moves in a favorable direction, the trailing take profit and stop loss price will track at the set ratio or price distance.

2. No Reverse Movement: When the price moves in the opposite direction, the trailing take profit and stop loss price will not move back.

I. Execution Conditions for Trailing Take Profit and Stop Loss

1.Long Position:

• The set activation price must be higher than the current market price.

• After the market price triggers the activation price, the trailing take profit and stop loss price will be adjusted upward. When the market price pulls back to the trailing take profit and stop loss price, the system will automatically close the position.

2.Short Position:

• The set activation price must be lower than the current market price.

• After the market price triggers the activation price, the trailing take profit and stop loss price will be adjusted downward. When the market price rebounds to the trailing take profit and stop loss price, the system will automatically close the position.

II. Examples of Setting Trailing Take Profit and Stop Loss (Divided into Ratio/Price Distance)

1. Ratio callback rate refers to the trailing take profit and stop loss price being adjusted based on a percentage of the market price. When the market price reaches the activation price, if the price reverses and exceeds the set ratio callback rate, the system will automatically close the position.

1.1 Ratio Long Position:

•Existing Position: 1 BTC, opening price 30,000 U, current market price 31,000 U.

•Prediction: Market pullback will not exceed 3%, close position when pullback exceeds 5%.

•Settings: Activation price 32,000 U, callback rate 5%.

•Result: If the market price reaches 32,000 U, the take profit and stop loss is activated and tracks the price. Suppose the price reaches a high of 35,000 U, then the trailing take profit and stop loss price is 35,000*(1-5%)=33,250. If the price falls back to 33,250 U, the system will automatically close the position.

1.2 Ratio Short Position:

•Existing Position: 1 BTC, opening price 30,000 U, current market price 29,000 U.

•Prediction: Market pullback will not exceed 3%, close position when pullback exceeds 5%.

•Settings: Activation price 28,000 U, callback rate 5%.

•Result: If the market price drops to 28,000 U, the take profit and stop loss is activated and tracks the price. Suppose the price reaches a low of 27,000 U, then the trailing take profit and stop loss price is 27,000*(1+5%)=28,350. If the price rebounds to 28,350 U, the system will automatically close the position.

2. Price distance callback rate refers to the trailing take profit and stop loss price being adjusted based on a set fixed price interval (price distance). When the market price reaches the activation price, if the price reverses and exceeds the set price distance, the system will automatically close the position.

Price Distance Example:

2.1 Long Position Price Distance Callback Rate Setting

1•Position Type: 1 BTC long position

2•Opening Price: 30,000 U

3•Current Market Price: 31,000 U

4•Activation Price: 32,000 U

5•Price Distance Callback Rate: 1,000 U

Operation Process:

When the market price rises from the current market price of 31,000 U to the activation price of 32,000 U, the trailing take profit and stop loss is activated.

Suppose the market price further rises to 34,000 U (current highest price), then the trailing take profit and stop loss price will be adjusted to 33,000 U (current highest price - price distance).

If the market price falls back from 34,000 U (current highest price) to 33,000 U (trailing take profit and stop loss price), the system will automatically trigger closing, selling to close at the market price.

2.2 Short Position Price Distance Callback Rate Setting Example

1. Position Type: 1 BTC short position

2. Opening Price: 30,000 U

3. Current Market Price: 29,000 U

4. Activation Price: 28,000 U

5. Price Distance Callback Rate: 1,000 U

Operation Process:

• When the market price drops from 29,000 U to 28,000 U, the trailing take profit and stop loss is activated.

• Suppose the market price further drops to 25,000 U, then the trailing take profit and stop loss price will be adjusted to 26,000 U (25,000 U + 1,000 U).

• If the market price rebounds from 25,000 U to 26,000 U, the system will automatically trigger closing, buying to close at the market price of 26,000 U.

Choosing the Appropriate Callback Rate Method

•Ratio Callback Rate: Suitable for situations with large market price fluctuations, because the ratio callback rate can automatically adjust the protection range according to market volatility.

•Price Distance Callback Rate: Suitable for situations with small or stable market fluctuations, because the price distance callback rate provides fixed callback protection.

Users can choose the appropriate callback rate setting method based on the current market environment and personal risk preference to better manage trading risks and lock in profits.

III. Long Position Already in Loss

3.1 Existing Position:

•Position Type: Long position

•Position Quantity: 1 BTC

•Opening Price: 30,000 U

•Current Market Price: 25,000 U

Unrealized Gross Loss:

• Estimated unrealized gross loss = (Opening price - Current market price) Position quantity = (30,000 - 25,000) 1 = 5,000

Settings when market rebounds but profit is uncertain:

•Activation Price: 28,000 U

•Callback Rate: 5%

Operation Logic:

1. Price rebound triggers activation: When the market price rebounds from 25,000 U to 28,000 U, the trailing take profit and stop loss is activated.

2. Market continues to rise: Suppose the price continues to rise to 28,500 U, the trailing take profit and stop loss price will be adjusted to 28,500 * (1 - 5%) = 27,075 U.

3. Price pullback triggers closing:

• If the price falls back from 28,500 U to 28,000 U and then rises again, the trailing take profit will not trigger closing because the pullback has not reached 5%.

• If the price falls back from 28,500 U to 27,075 U or lower, the system will close the position at 27,075 U.

Result Analysis:

•Transaction Price: 27,075 U

•Stop Loss: Compared to the opening price of $30,000, the loss is smaller.

•Profit: Compared to the market low of $25,000, closing at this price still reduces some losses.

3.2 Short Position Already in Loss

Existing Position:

•Position Type: Short position

•Position Quantity: 1 BTC

•Opening Price: 30,000 U

•Current Market Price: 35,000 U

Unrealized Gross Loss:

• Estimated unrealized gross loss = (Current market price - Opening price) Position quantity = (35,000 - 30,000) 1 = 5,000

Settings when market falls but profit is uncertain:

•Activation Price: 32,000 U

•Callback Rate: 5%

Operation Logic:

1. Price fall triggers activation: When the market price falls from 35,000 U to 32,000 U, the trailing take profit and stop loss is activated.

2. Market continues to fall: Suppose the price continues to fall to 31,000 U, the trailing take profit and stop loss price will be adjusted to 31,000 * (1 + 5%) = 32,550.

3. Price rebound triggers closing:

• If the price rebounds from 31,000 U to 31,500 U and then falls again, the trailing take profit will not trigger closing because the rebound has not reached 5%.

• If the price rebounds from 31,000 U to 32,550 U or higher, the system will close the position at 32,550 U.

Result Analysis:

•Transaction Price: 32,550 U

•Stop Loss: Compared to the opening price of 30,000 U, the loss is larger.

•Profit: Compared to the market high of 35,000 U, closing at this price still reduces some losses.

Note: The price distance logic is the same. For settings, refer to the price distance setting logic in this chapter.

IV. Setting Trailing Take Profit and Stop Loss and Ordinary Take Profit and Stop Loss Simultaneously:

Existing position: 1 BTC long position

Opening price: 30,000

Latest market price: 30,050

Activate at latest market price

Callback rate: 5%

Ordinary stop loss price: 28,500

When the market price rises to 30,060, the trailing take profit and stop loss price is 30,060*(1-5%)= 28,557

If the market price then falls continuously from 30,060 to 28,557, the trailing take profit and stop loss is triggered and executed at 28,557, and the set ordinary stop loss order is automatically canceled.

Existing position: 1 BTC long position

Opening price: 30,000

Latest market price: 30,050

Activate at latest market price

Callback rate: 5%

Ordinary stop loss price: 29,000

When the market price rises to 30,060, the trailing take profit and stop loss price is 30,060*(1-5%)= 28,557

If the market price then falls continuously from 30,060 to below 29,000, the ordinary stop loss at 29,000 is triggered first and executed at market price, and the trailing take profit and stop loss order is automatically canceled.

V. Terminology Explanation

Callback:

•Definition: In financial markets, a callback refers to a brief reverse movement of price after a sustained rise or fall. Usually in an uptrend, the price will have a certain downward adjustment and then continue to rise; while in a downtrend, the price will have a certain upward adjustment and then continue to fall.

Callback Rate:

•Definition: The callback rate is the magnitude of the price pullback from the highest or lowest point, expressed as a percentage. It measures the degree of adjustment of the market price during the callback process.

•Long Position Callback Rate:

•Definition: In a bull market, the magnitude of the price decline from the highest point.

•Formula: Callback rate = (Highest price - Current price) / Highest price

•Short Position Callback Rate:

•Definition: In a bear market, the magnitude of the price rebound from the lowest point.

•Formula: Callback rate = (Current price - Lowest price) / Lowest price