Trailing Stop (RM-S)
This type of intelligent order is based on the functionality of the Stoploss order. In order for this order to be used effectively, the basic version has been expanded to include the option to enter a search price. The Trailing Stop variant allows for a timely reaction of the intelligent order until the moment a change in the trend occurs, e.g. a local minimum or maximum price is reached. Once the price changes within the trend, the Stop Price is moved by the entered deviation. If the trend changes, the order remains fixed on the last achieved Stop Price and is then forced to activate the standard buy or sell order located at the depth of the market. Here a Trailing Stop sell order is used to sell below the local or daily maximum during a change in the trend.
A Trailing Stop buy order is used to move the Stop Price downwards to try and buy just above the local or daily minimum during a declining trend.
Due to the fact that it is unknown just how long a trend will continue when the Trailing Stop order is placed, e.g. to which value the Stop Price will be moved to at the moment the order is activated, the order must be a market type order, i.e. without a Limit Price.
Trailing Stop maximizes profit!
- The Trailing Stop order is an intelligent broker order, and is administered in the Fio banka system.
- The order (Stop Price) reacts to changes in bids and offers as opposed to Stoploss, which reacts to trades or the closing price for the day.
- One advantage of Trailing Stop is the ability to enter a Stop Price in terms of changes.
- A Trailing Stop order can also be entered without Limit Prices, meaning it acts as a "market" type order once activated.
- A Trailing Stop order cannot be used with an EasyClick order - in this case a Trailing Limit intelligent order must be used.
Example Trailing Stop sell order
An investor wants to sell 100 shares of ČEZ, which were purchased at CZK 700 in the past in order to realize a profit. The investor considers CZK 870 to be the next upcoming maximum in the price but the price may strengthen slightly during the course of the day. The investor places a Trailing Stop sell order.
- Current price at order placement: CZK 869.40
- Best bid: CZK 869
- Entered Stop Price deviation: CZK 3
- Entered Limit Price: not shown (market price)
At order placement:
Once the order is sent the initial Stop Price at CZK 866 (869 - 3) is generated. The order is placed in the background of the Fio banka system and monitors market developments. If the price falls and the best bid reaches a value of CZK 866 or lower the sell order is activated.
| Price (CZK) | Cumulative number of shares | |
| 874.10 | 1,936 | Offer |
| 873.20 | 1,627 | |
| 872.90 | 1,423 | |
| 871.80 | 423 | |
| 871.00 | 123 | |
| 869.40 | Last trade | |
| 869.00 | 89 | Bid |
| 867.00 | 691 | |
| 866.10 | 1,324 | |
| 866.00 | 6,589 | |
| 865.80 | 6,895 |
With increasing bids:
Share price rises to CZK 875.30. The best bid reaches a value of CZK 875.10, which helps to fix the Stop Price at CZK 872.10 (875.10 - 3). The Stop Price once again is fixed.
| Price (CZK) | Cumulative number of shares | |
| 877.10 | 1,456 | Offer |
| 876.30 | 1,123 | |
| 875.90 | 687 | |
| 875.50 | 368 | |
| 875.30 | 174 | |
| 875.30 | Last trade | |
| 875.10 | 158 | Bid |
| 875.00 | 597 | |
| 874.60 | 995 | |
| 873.10 | 1,624 | |
| 872.80 | 2,365 |
Stock price falls and approaches Stop Price
The best bid falls to CZK 873.20. The Stop Price remains fixed to its maximum of CZK 872.10. The order is not yet activated as the best bid is still higher than the current Stop Price.
| Price (CZK) | Cumulative number of shares | |
| 875.50 | 1,698 | Offer |
| 875.10 | 1,257 | |
| 875.00 | 968 | |
| 874.40 | 578 | |
| 873.90 | 50 | |
| 873.40 | Last trade | |
| 873.20 | 200 | Bid |
| 872.70 | 748 | |
| 871.90 | 1,698 | |
| 871.10 | 2,325 | |
| 871.00 | 2,876 |
The best bid drops below the current Stop Price:
The best current bid drops below CZK 872.10, which is the highest achieved Stop Price. An order is sent to the market to sell 100 shares (market), which is then paired with the best bid. The trade is divided into two. The first sells 80 shares at CZK 872 and the second sells the remaining 20 shares at CZK 871.60.
| Price (CZK) | Cumulative number of shares | |
| 875.00 | 3,254 | Offer |
| 874.60 | 1,632 | |
| 874.00 | 965 | |
| 873.40 | 550 | |
| 873.00 | 100 | |
| 872.50 | Last trade | |
| 872.00 | 80 | Bid |
| 871.60 | 362 | |
| 871.20 | 589 | |
| 870.50 | 1,214 | |
| 870.40 | 2,987 |
Result
The investor does not need to search the market continuously on the computer, the system automatically sells the shares for a price that is higher than when the order was placed.
