How to Set Trailing Stop Loss on MT4

How to Set Trailing Stop Loss on MT4 and How Trailing Stop Loss Works

Using a trailing stop loss is one of the methods that helps you to manage your positions and take care of your profit. I personally don’t use trailing stop loss, but maybe you are interested in it because of the different trading strategy you have. So, let’s start from the basics of trailing stop loss and then learn how to set it on MT4 platform.

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What Is Trailing Stop Loss?

Trailing stop loss is a feature that some of the trading platforms, including MT4, support. When you set it on an open position, it moves your stop loss further when the price moves toward the target. For example you take a long position and you set a 100 pips stop loss, and a 50 pips trailing stop loss. Trailing stop loss doesn’t do anything as long as the position is not in profit. However, as soon as the position goes to profit for 50 pips, the trailing stop loss moves the stop loss to breakeven.
After this stage, if the price turns around and goes against you, the stop loss remains at breakeven and the trailing stop loss doesn’t do anything. But, if the price keeps on moving accordingly, the trailing stop loss moves the stop loss one point further, for each point that the position’s profit goes beyond 50 pips. So, if the position reaches 100 pips profit eventually, the stop loss will be placed 50 pips above the entry price.
This is how the trailing stop loss locks your profit.
Note:

1. If you don’t set any stop loss for your position, but you set a trailing stop loss, then the trailing stop loss will set a stop loss at breakeven, as soon as it is the time for the trailing stop loss to move the stop loss to breakeven.
2. Unlike stop loss and target orders that are set on the broker’s server and work even if you turn off you computer or close the platform, trailing stop loss works at your side and from your computer and while the platform is up and running. The broker’s servers know nothing about the trailing stop loss you set. Therefore, if you turn off your computer or shut down the MT4 platform, the trailing stop loss will not work anymore, and the stop loss will not be moved.

How to Set a Trailing Stop Loss on MT4

It is very easy to set a trailing stop loss on your position on MT4 platform:

1. Take a position and set the stop loss and target orders if you want (never trade without a reasonable stop loss).
2. Press Ctrl+T to open the MT4 terminal.
3. Click on the “Trade” tab which is the first tab.
4. Right click on the position’s record on the “Trade” tab.
5. Over your mouse pointer on “Trailing Stop”.
6. Click on one of the options: 15 points, 20 points, … . Note that 20 points means 2 pips on the platforms that have 5 decimals for the price of the currency pairs like EUR/USD, or 3 decimals for currency pairs like USD/JPY. This will be a too tight trailing stop loss, because it will move the stop loss too close to the market price, and so, your the position will be closed with a small price movement. To set a wider trailing stop loss, click on “Custom…” and then enter the value. For example if you want to set a 50 pips trailing stop loss, you have to enter 500.
7. Click on the “OK” button.
8. You are done. Leave your computer and the platform on.

What is Trailing Definition:
Trailing stops are more dynamic in nature. When using trailing stops the stop price level changes after a specified number of pips. Some trading platforms allow you to also set a trailing stop based on percentage moves as well. Trailing stops are usually used when you want to take as much of profits as possible during extreme trends. For example, setting a trailing stop of 20 Pips would mean that a new stop level would be set when price moves 20 pips in your favor.
For example, if you placed a Buy order on EURUSD at 1.385 and set the initial stop loss to 1.375 and a trailing stop of 10 Pips, then if price moves 20 pips in your favor the new stop loss would be moved to 1.385, thus making your trade break even. If price continues to move a further 20 pips, then the trailing stop moves another 10 pips in your favor setting your new stop loss order to 1.395 (thus locking in 10 pips of profit).
Trailing stops can be used alongside the take profit order as it can help to make your trade lock in as much pips as you want (and as specified by the trailing stop) instead of setting a static stop loss order.
The following chart below illustrates using stop loss, take profit and trailing stops

Stop Loss and Take Profit in Forex

Stop loss and take profit forms two important elements of trade management and is just as important as the analysis one would do before opening a position. In this article, we present a brief guide to using stop loss and take profits and also present a detailed tutorial into how to set the Stops and target levels using the MT4 trading platform.
Stop loss (SL) or stops is defined as an order that you tell or send to your broker telling them to limit the losses on an open position (or trade).
Take profit (TP) or target price  is an order that you tell or send to your broker informing them to close your position or trade when price reaches a specified price level in profit. To learn more about these orders, read our article on Types of  Orders in MetaTrader  to learn in detail about the limit and stop orders. Stop loss and take profit levels are static in nature. In other words, the orders are triggered (and your trade is closed) when a security reaches a specified price level.
For example, if you placed a Buy order on EURUSD at 1.385 and set stop loss at 1.375 and target level of 1.395, when price moves below your entry and hits 1.375 your order is closed for a loss of 10 pips. Likewise, when price moves to 1.395, your order is closed for a profit of 10 pips.
Why set stop loss or target profit?
The reason why traders would set a stop loss or target profit levels is to manage their trades better. Imagine trading without a stop loss, which could potentially exhaust all your equity. Likewise, imagine not trading without a target price, which would basically expose your entire account equity to the market fluctuations.
What is Trailing Definition:
Trailing stops are more dynamic in nature. When using trailing stops the stop price level changes after a specified number of pips. Some trading platforms allow you to also set a trailing stop based on percentage moves as well. Trailing stops are usually used when you want to take as much of profits as possible during extreme trends. For example, setting a trailing stop of 20 Pips would mean that a new stop level would be set when price moves 20 pips in your favor.
For example, if you placed a Buy order on EURUSD at 1.385 and set the initial stop loss to 1.375 and a trailing stop of 10 Pips, then if price moves 20 pips in your favor the new stop loss would be moved to 1.385, thus making your trade break even. If price continues to move a further 20 pips, then the trailing stop moves another 10 pips in your favor setting your new stop loss order to 1.395 (thus locking in 10 pips of profit).
Trailing stops can be used alongside the take profit order as it can help to make your trade lock in as much pips as you want (and as specified by the trailing stop) instead of setting a static stop loss order.

The following chart below illustrates using stop loss, take profit and trailing stops.

How to set Stop Loss and Take Profit in MT4
On ECN account:
 When you place a pending order, you can specify the entry, stop and target price levels. The following picture shows the order window when a pending order is used on the MT4 platform.

Figure 1: Stop and Target levels using pending orders

If you are using a market order, you can always update the stop and target levels by right clicking on the open position and selecting ‘Modify or Delete Order’ option, which opens the order management window allowing you to set up the stop and target levels.

Figure 2: Modifying Stop and Target Price in Market Order

To set up trailing stops, right click on the open order and select ‘Trailing Stop’ In this option you can select a pre-defined trailing stop values or choose ‘Custom’ to set up your own trailing stop value. To delete previous trailing stop values, right click to select ‘Trailing Stop’ and then select ‘Delete All’ to remove the previous trailing stop value.

Figure 3: Setting up Trailing stops

Trailing stops, stop loss and take profit levels are one of the easiest trade management actions a trader can do. Despite their simplicity, using stop loss and take profit levels can help a trader to manage their profits and losses in a more efficient manner without having to expose their capital too much and risk losing it in its entirety.
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F2) Trailing Stop Buy, Trailing Stop Sell Template

Figure 2 shows a stylistic representation of the Trailing Stop Buy, Trailing Stop Sell Trading Template.
Source: TRADERS´ graphic