A trailing return refers to a period of past data. The most common example is the performance of a mutual fund over a period of five years. Its trailing return is computed by subtracting the current net asset value from the value at the end of the period. Then, divide that figure by 100 to get the trailing return. This figure represents the fund’s trailing returns over that time frame. Then, use this value to calculate the fund’s annualized returns over the same period.
Traders use trailing stop losses when they want to close their positions. The trigger for the order can either be the Last Price or Mark Price. If the Mark price is higher than the activation price, the trailing stop loss will be activated. In Binance, the Mark is used as the liquidation trigger because it measures the unrealized profit. However, traders should always check the expiry times to determine when to enter and exit a position.
The trailing stop order remains in effect until it is triggered, after which it becomes a market order and is submitted for execution. Although a market order is not guaranteed to result in a specific price, it can still result in a sale or purchase. The only downside is that the trailing stop order may not work when the market’s highest price doesn’t surpass the activation price. If this happens, the trailing stop order is not activated and the investor loses the money.
The trailing stop is an order that will execute as soon as the initial bid is met. The trailing stop should never be reset during a momentary price dip, because it will lead to a lower effective stop-loss. Reining in a trailing stop is generally advisable during a market’s peaks and lows and when the stock is near a new high. Then, the trader can exit the position.
The trailing stop order is the mirror of a sell-stop limit order. This type of stop limit order allows an investor to specify a maximum loss, but does not limit a maximum gain. A sell trailing stop limit order is not a buy limit order. A sell trailing stop-limit will only fire if the market price reaches its trigger price. As a result, a successful trade will have a higher risk of profit than a non-trailing stop.
A trailing stop order follows the current price. Its Stop (order trigger) is tied to the current price. In other words, the trailing stop order follows the price as it rises or falls. A sell-trailing stop order, on the other hand, will only execute when the market reaches the target. It is therefore a very useful tool in trading. When the price hits the target, it will continue moving upward.