Hi Zoran,
There are advantages and disadvantages.
Advantages:
1. Locks in Profits: As the price moves in a favorable direction, the trailing stop moves up or down with the market (depending on whether you’re long or short), allowing you to lock in profits without needing to constantly adjust your stop loss manually.
2. Limits Losses Automatically: If the market reverses, the trailing stop helps limit losses by closing the trade once a predetermined distance from the market price is reached.
Disadvantages:
1. Can Trigger Prematurely in Volatile Markets: In highly volatile markets, the trailing stop may be hit prematurely due to short-term price swings, closing the trade before the trend continues in the desired direction.
2. The trailing stop moves based on a fixed distance from the current price, which might not always adapt well to the changing market conditions, like tightening ranges or trend shifts.
So, it’s up to you, really :-)
Cheers,
Ilan