Trailing Take Profit is intended to maximize profit; the essence of its operation can be examined using the following example:
- You buy 1 ETH for $100 and set Take Profit of +5%, at $105;
- You check the box "Trailing";
- You set "Follow max price with deviation (%)" to 1. What this is and what it does will be explained later.
- We will not deal with the Price follow method in this case and leave it as default choice "Bid", but you can see the available choices here;
- After a while the ETH price reaches $104 and Trailing Take Profit does the following:
|No.||ETH price for 1 unit||Trailing Take Profit value||Transaction status|
|2.||$105 (rise)||$103.95||Trailing Take Profit activated|
|3.||$104.30 (correction)||$103.95||Trailing Take Profit activated|
|4.||$105 (rise)||$103.95||Trailing Take Profit activated|
|5.||$106 (rise)||$104.94||Trailing Take Profit activated|
|6.||107$ (rise)||105.93$||Trailing Take Profit activated|
|7.||108$ (rise)||106.92$||Trailing Take Profit activated|
|8.||$107 (correction)||$106.92||Trailing Take Profit activated|
|9.||$110 (peak of rise)||$108.90||Trailing Take Profit activated|
|10.||$109.24 (begins to fall)||$108.90||Trailing Take Profit activated|
|11.||$108 (fall)||$108.90||Closed, sold at approx. $108.80|
As a result, the transaction closes at roughly $108.80. This brings an 8.8% profit instead of the expected 5%. To understand this better, let us consider a visual example.
This is MCO; the ups and downs in the graph were real.
Let’s assume that a coin was bought at 0.00066000 and TTP of +5% was set at 0.00069300. As soon as the price reached this level, TTP was activated and began to follow the price. TTP set the level of 69300 as the maximum price and created a tentative Follow Line at 1% (this is the trailing price) below it. Each time the price is checked, the following scenarios are possible:
- The current price is above the previous maximum price, so the system moves the Follow Line by a level (New maximum price - 1%) and sets the new maximum price;
- The current price is below the previous maximum price, but above the Follow Line, so the system waits and does nothing;
- The current price is at or below the Follow Line, and the system closes the transaction.
Trailing Take Profit is like Take Profit combined with Trailing Stop Loss.
FYI: if you’ve traded on the Forex market, then Trailing Take Profit is the same as Trailing Stop.
Price trailing percent
Briefly, this is the maximum deviation downward from the maximum price reached after the Take Profit level was reached. If you set Take Profit at +10% with price deviation of 2%, you can wind up in the following situations:
- The price reached +10%, then fell to +9.5% and then rose again, and the transaction remained open.
- The price reached +10%, then fell to +8% and then rose again, and the transaction remained open.
- The price reached +10%, then fell to +7.9% and then rose again, and the transaction closed at +7.9%. Why? The difference between your Take Profit of +10% and the price at +7.9% is greater than the deviation of 2% you indicated.
- The price reached +10%, and then fell to +7.9% and continued to fall; the transaction was closed at +7.9% for the same reason as in the preceding case.
In the first two cases, events may also have proceeded as follows:
- The price reached +13%, then fell to +11.5% and then rose again, and the transaction remained open.
- The price reached +15%, then fell to +14% and then rose again, and the transaction remained open.
- The price reached +15.5%, then fell to +14% and continued to fall to +10%, and the transaction closed at +13.4%. Why? The difference between +15.5% and +14% is 1.5% and is still within the 2% deviation you indicated. When the price hit the 13.4% level, the deviation from the maximum price of +15.5% became 2.1% and exceeded the maximum deviation you specified, and thus the transaction was closed.