Trailing Take Profit
Trailing take profit is a stop loss that functions very similarly to the Trailing Stop-Loss with one single difference: it has an activation point. Unlike the regular stop-loss which has a fixed position this one does not. Trailing take profit will work just like the Trailing Stop-Loss once the activation percentage has been reached by the price of the asset and it move upwards with the price action and sell once a reversal happens and the price hits the newly reached stop loss target.
Trailing stop-loss is a great way to increase your profits by being able to catch waves. Rather than having a fixed exit target trailing stop-loss raises the stop-loss with the price action meaning that the stop-loss will always be just under the current price. Once the upwards trend reverses and the stop-loss is now directly under the current price.
With trailing take profit, you do not use a static take profit because the price action could go upwards multiple percent at a time with the stop-loss acting as a take profit following right behind the price action. However, it could be wise to introduce a stop-loss in case the price never reaches trailing take profits activation point.
For example, your trailing take profit is set to be activated at 1%, your take profit is 1.25%, and a stop loss set at 1%. This means that if you enter a position and the price falls by 1% then you exit the position with a 1% loss. If you enter a position and the price goes up 0.5% but then hits the stop loss once again you will exit the position with a 1% loss. However, if the price goes up to 1% and the trailing take profit activates, now the bot will closely follow the price action with an imaginary stop loss line 1.25% from the highest high. This does mean that if the price goes up 1% and then dumps the bot will exit the trade with a 0.25% loss.
Image source: PatternsWizard
As you can see trailing take profit is a very powerful tool that can help you increase your profits by locking in profits gained and allowing you to ride out green waves.
For more information (also the sources) visit: Investopedia and PatternsWizard