Trailing Stop Order: How Automatic Protection Works in Spot and Margin Trading

Trailing stop order is a dynamic position management tool that automatically adjusts to market movements. Unlike a regular stop order, trailing protection does not stay at a fixed level but continuously tracks the best achieved price and automatically shifts the protection line when the market moves favorably. This allows traders to simultaneously limit losses and lock in increasing profits without manually repositioning orders.

How Trailing Protection Works

A trailing stop order functions the same way for spot, margin, perpetual, and futures trading, but the scope of its application varies. In spot and margin trading, it can be used both for entering a position (buy) and for exiting (sell). In perpetual and futures trading, this feature is exclusively used as a tool to close already open positions.

After placing a trailing order, the system continuously monitors the asset’s price. If the market price reaches a favorable level and then retraces by the amount you set (distance or percentage), a market order is triggered automatically.

Two Approaches to Setting the Retracement Trajectory: Distance or Percentage

You can configure trailing protection in two ways:

Absolute Distance: The system tracks the difference between the highest achieved price and the current quote in monetary units. For example, if you set a correction of 1000 USDT, the order will trigger when the price retraces exactly this amount from the peak.

Percentage Retracement: The protection is calibrated as a percentage of the best price. If you set a 10% retracement, the order activates when there is a 10% decline from the maximum (for buying) or a 10% increase from the minimum (for selling).

Scenario 1: Buying with Dynamic Distance Protection

Suppose Trader A places a buy trailing order for BTC/USDT with a correction distance of 1000 USDT at the current price of 50,000 USDT.

Development:

If the price does not decrease and remains at or above 50,000 USDT, the trailing order activates at 51,000 USDT.

When the price drops to 48,000 USDT, the system automatically recalculates the protection: the new trigger level becomes 49,000 USDT (48,000 + 1000). This low point (48,000) now serves as the new reference level.

If the price then recovers to 48,500 USDT, the protection level remains at 49,000 USDT. The trailing does not rise during temporary recoveries, only when new peaks are reached.

The order will only trigger when the price retraces by the full 1000 USDT from this new minimum (48,000), i.e., when it falls to 47,000 USDT.

If an activation price was previously set, the trailing will only start after reaching it. If no activation price is set, the trailing functions immediately based on the current price at the time of placement.

Scenario 2: Selling with Percentage Retracement

Now, suppose Trader B places a sell trailing order for ETH/USDT with a 10% correction at a price of 4000 USDT.

Sequence of Activation:

If the price does not rise above 4000 USDT, the trailing activates at 3600 USDT (4000 × 90%).

When ETH rises to 4100 USDT, the system recalculates: the new protection level becomes 3690 USDT (4100 × 0.9). Now, 4100 USDT is the new maximum, based on which the percentage is calculated.

When the price drops to 3700 USDT, the protection remains at 3690 USDT. The trailing does not adjust downward during dips.

The order can only trigger when there is a 10% retracement from the new peak (4100 USDT), i.e., when it falls to 3690 USDT or lower.

As in the first scenario, the presence of an activation price determines when the trailing begins to operate.

Triggering Mathematics: Formulas for Different Order Types

Based on the scenarios above, the universal calculations for determining the trigger level of a trailing stop order in spot trading are:

For a buy order:

• Trigger level = Lowest achieved price + correction size (distance)
• Trigger level = Lowest achieved price × (1 + correction percentage)

For a sell order:

• Trigger level = Highest achieved price − correction size (distance)
• Trigger level = Highest achieved price × (1 − correction percentage)

Step-by-Step Placement of a Trailing Order

The procedure to set up trailing protection in spot and margin trading is straightforward:

Step 1: Open the spot trading section and select the “Trailing Stop Order” function.

Step 2: Choose the retracement method — enter either a percentage or an absolute amount in monetary units.

Step 3: Specify the price or volume of the position for the order.

Step 4: Optionally, set an activation price. If no pre-activation is needed, leave this field blank.

Final step: Click “Buy” or “Sell” — your trailing order is placed.

Managing Active Trailing Orders

To view all current trailing orders, go to the Open Orders tab and select the Trailing Stop Orders subsection. Here, you can edit parameters via the pencil icon next to the order information or completely cancel the order by clicking the Cancel button.