To all of those who don’t know, let me clarify what a trailing stop is: A trailing stop allows me, a trader, to place a preset order when a large callback occurs. I can use it for selling when the market falls from a higher point, or for buying when the market rebounds from the bottom. Once the callback rate and the activation price are met, the strategy will be triggered to place a limit order. A Pre-set price (e.g.: Optimal N or Formula Price) is used in this case.
I have chosen Huobi Futures as my preferred platform for executing various types of trades for the pronounced benefits it possesses over its peers.
Before I dive into how I used trailing stops in Huobi Futures, certain parameters should be explained in brief.
It is calculated as:
[ The highest price x (1-Callback rate)] or [The lowest price x (1+Callback rate)]
Lowest/Highest price: This refers to either the lowest or the highest price from the time of setting up the strategy to when it has been triggered.
Certain trigger conditions exist for both Buy and Sell directions:
How you can benefit from using Trailing Stops on Huobi Futures
Huobi Futures allows me to place trailing stops when using USDT-margined swaps. Huobi USDT-margined swaps support 1x-125x leverage and are settled in USDT. At the time I traded, BTC was valued at 50,000 USDT(Tether). After much analysis, I predicted that BTC would slip down to 48,000 USDT. So, I decided to purchase 100 conts of long position by entering the following parameters:
To do this, I clicked “Trailing Stop” on the Huobi interface and set the activation price at 48,000 USDT with the callback rate of 2%. After that, I entered the amount of 100 conts and chose Optimal 5 as the price. Finally, I clicked “Open Long” to place the order.
At one point BTC/USDT swap price declined to the lowest point of 47,600 USDT, which was lower than the activation price I set at 48,000 USDT. This met my first trigger condition as discussed above. Soon after, the price rebounded to 48552 USDT, which satisfied the set callback rate 2% (48552/47600 -1). With this, my 2nd trigger condition was met as well. subsequently the system purchased 100 conts of a long position with the price of Optimal 5 after the strategy had been triggered.
Finally, I checked Positions and found the order was filled at 48,600 USDT. Then after one week the market price rose to 53,000, I sold these 100 conts of swaps with the BBO price and gained (53,000-48,600) * (0.001*100) = 4400*0.1=440 USDT. And all my transaction fee was 48,600*0.001*100*0.02%+53,000*0.001*100*0.04%=0.972+2.12=3.092 USDT. Therefore, my total profits gained from this trailing stop strategy was 440-3.092=436.9 USDT.
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