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Delayed Trailing Stop-Loss

Delayed Trailing Stop-Loss is a combination of regular stop-loss and trailing stop-loss. It starts with regular stop-loss to minimize the loss if the position drops in value. If the price goes up, there is an activation percentage, once the price action meets the activation percentage trailing stop-loss is activated, and from there, trailing stop-loss is used until the position is closed by the price pulling back into the trailing stop-loss.

The benefit of the delayed trailing stop-loss is that you can have a large stop-loss target at the start, later locking in your profits once the position starts going up with a much smaller stop-loss with trailing stop-loss. With regular trailing stop-loss, your stop-loss percentage is often very small, so small fluctuations could cause you to lose your position due to the tight gap between your entry and stop-loss. With delayed trailing stop-loss, you have a bigger opportunity to profit because you will have a much more significant gap until stop-loss is activated.

Example

For example, you set your stop-loss percentage to be 2.5%, this means that if your position drops by 2.5%, you will have your position closed automatically by a market sell. Your trailing stop-loss activation percentage is 0.75%, which means that if the price goes up to 0.75% above your entry price, you will activate the trailing stop-loss. Finally, your trailing stop-loss percentage is 0.25%, this means that once the trailing stop-loss is activated by hitting 0.75%, you will have at least 0.25% of your profits locked in. So even if the price goes down, you will lock in at least 0.25%, but you can make way more if the price continues to go up.

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This means that if the price goes down an entire 2%, you will not exit the trade, but later once you’re in profit, the profit will be locked in by the trailing stop-loss activation and the original stop-loss will be replaced by trailing stop-loss.

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  1. The bot enters the position (black line).
  2. Right away the bot places a stop-loss 2.5% below the entry price (lower red line).
  3. Once the price action rises 0.75% above the buy price (orange line) trailing stop-loss is activated.
  4. The new stop-loss is now 0.25% (upper red line) below the current price action thanks to trailing stop-loss activating.
  5. Due to Trailing stop-loss activating the previous stop-loss from step 2 is now removed.
  6. The price action reverses and the position is sold when the price action meets the trailing stop-loss line.