A trailing stop in MetaTrader 4 (MT4) is a dynamic stop-loss order that adjusts automatically as the market moves in your favour, helping secure profits while limiting potential losses. This tool is particularly useful for managing trades in trending markets. Here’s how to set up a trailing stop in MT4.

1. Open a Trade

• Place a trade by clicking New Order in the toolbar or pressing F9.
• Set the trade’s parameters, including lot size, stop-loss, and take-profit, and execute the order.

2. Access the Trade in the Terminal

• Open the Terminal window by pressing Ctrl + T or selecting View > Terminal from the menu.
• Navigate to the Trade tab, which lists all open positions.

3. Apply a Trailing Stop

• Right-click on the trade you want to manage in the Trade tab.
• From the context menu, select Trailing Stop.
• Choose a predefined trailing stop distance in points (e.g., 15 points, 50 points).
  • Points Definition: One point equals one pip in most forex pairs, except for pairs with fractional pip pricing (where one point equals 0.1 pip).
• To set a custom trailing stop, select Custom, enter your desired distance in the popup window, and click OK.

4. Monitor the Trailing Stop

• Once applied, the trailing stop automatically adjusts your stop-loss level as the market price moves in your favour by the specified distance.
• If the market price moves against your position, the stop-loss remains fixed at its last adjusted level.

5. Modify or Remove the Trailing Stop

• To change the trailing stop, repeat the process and select a new distance.
• To remove it, right-click the trade, go to Trailing Stop, and select None.

Important Notes About Trailing Stops in MT4

• Platform Must Be Open: The trailing stop operates locally on your MT4 terminal, meaning it will stop functioning if you close the platform or lose internet connectivity.
• Minimum Distance: The trailing stop must be set at least a few points away from the current market price, depending on the broker’s restrictions.
• Real-Time Adjustments: The trailing stop only activates when the trade is in profit and the price moves beyond the specified distance.

Tips for Using Trailing Stops Effectively

• Use in Trending Markets: Trailing stops work best in strong trends where the price moves consistently in one direction.
• Combine with Indicators: Use indicators like moving averages or RSI to identify optimal trailing stop distances.
• Set Reasonable Distances: Avoid setting trailing stops too tight to prevent being stopped out by minor price fluctuations.
• Monitor Volatility: Adjust the trailing stop distance based on market conditions to account for high or low volatility.

FAQs

What is a trailing stop in MT4?
A trailing stop is a dynamic stop-loss order that adjusts as the market moves in your favour, locking in profits while limiting losses.

Can I set a trailing stop when placing a trade?
No, trailing stops must be added after the trade is opened.

Does the trailing stop work when MT4 is closed?
No, the trailing stop only functions when MT4 is open and connected to the internet.

What is the minimum distance for a trailing stop?
The minimum distance varies by broker, typically starting from 10 points or 1 pip.

Can I use trailing stops on pending orders?
No, trailing stops can only be applied to active trades.

What happens if the market reverses after the trailing stop adjusts?
The trade will close at the last adjusted stop-loss level, securing the locked-in profit or limiting the loss.

Are trailing stops suitable for all trading strategies?
They are most effective for trend-following strategies but may not be ideal for range-bound or highly volatile markets.

Can I apply a trailing stop to multiple trades?
Yes, but you must set the trailing stop individually for each trade.

What’s the difference between a trailing stop and a fixed stop-loss?
A fixed stop-loss remains static, while a trailing stop adjusts dynamically as the market moves in your favour.

Can I backtest trailing stops in MT4?
Yes, but you’ll need to use Expert Advisors or custom scripts, as MT4’s Strategy Tester does not support manual trailing stop simulation.

Conclusion

Setting up a trailing stop in MT4 is a straightforward process that can enhance your trade management by locking in profits and limiting risks. By understanding how to configure and monitor trailing stops effectively, you can improve your trading outcomes in trending markets. Unlock your full potential with our expert-led trading courses. Gain insights, learn winning strategies, and take control of your trading journey today.