How Do You Set A Trailing Stop Loss On TD Ameritrade
TD Ameritrade is a well-known brokerage company that offers advanced trading tools, research and education for retail and institutional traders. One of its popular features is the trailing stop loss order, which is an automated order that helps traders protect their profits and minimize their losses. In this article, we will discuss how to set a trailing stop loss on TD Ameritrade and answer some frequently asked questions about this feature.
What is a Trailing Stop Loss?
A trailing stop loss is a type of order that automatically adjusts the stop loss level as the price of the asset moves in the desired direction. It is a popular tool among traders who aim to secure their profits while allowing the trade to run in their favor. The trailing stop loss follows the market trend and locks in gains while minimizing losses.
For example, if a trader buys a stock at $50 and sets a trailing stop loss of $1, the order will be triggered if the price falls below $49. However, if the price rises to $60, the stop loss will be automatically adjusted to $59, locking in a profit of $9. The trailing stop loss will keep moving up as the price rises, but if the price falls back to $59, the trader will be stopped out with a profit of $9.
How to Set a Trailing Stop Loss on TD Ameritrade?
Setting a trailing stop loss on TD Ameritrade is easy and straightforward. Here are the steps to follow:
Step 1: Log in to your TD Ameritrade account.
Step 2: Select the asset you want to trade and click on “Trade.”
Step 3: Choose “Advanced Order” and select “Trailing Stop” from the drop-down menu.
Step 4: Set the parameters of your order, including the trigger price, the trail amount, and the order type (buy or sell).
Step 5: Review your order and submit it.
It is important to note that TD Ameritrade charges a commission of $0.65 per options contract, and a fee of $25 per exercise or assignment. However, the trailing stop loss is a free feature and can be used without any additional charges.
FAQs About Trailing Stop Loss on TD Ameritrade
Q1: Does TD Ameritrade offer a mobile app to set trailing stop loss orders?
Yes, TD Ameritrade offers a mobile app for iOS and Android devices that allows traders to set trailing stop loss orders on the go. The app is free to download and offers a user-friendly interface with advanced trading tools and real-time market data.
Q2: Can I set a trailing stop loss on TD Ameritrade for mutual funds?
No, TD Ameritrade does not allow traders to set trailing stop loss orders for mutual funds. However, traders can still use other order types, such as stop loss and limit orders, to manage their positions.
Q3: Are there any restrictions on the trailing stop loss order on TD Ameritrade?
Yes, there are some restrictions on the trailing stop loss order on TD Ameritrade. For example, the minimum trail amount is $0.01, and the maximum trail amount is 50% of the current market price. Traders should also be aware that the trailing stop loss order is not guaranteed to be executed at the exact price level specified, as it may be affected by market volatility and liquidity.
Q4: Can I cancel or modify a trailing stop loss order on TD Ameritrade?
Yes, traders can cancel or modify a trailing stop loss order on TD Ameritrade as long as it has not been executed yet. To cancel or modify an order, traders should log in to their account and navigate to the “Order Status” tab, where they can see all their active orders and take appropriate actions.
Conclusion
Overall, the trailing stop loss is a powerful tool that can help traders to manage their risk and optimize their profits. By setting a trailing stop loss on TD Ameritrade, traders can automate their exit strategy and focus on their trading strategy without being tied to their screens. However, traders should also be aware of the limitations and risks involved and use the trailing stop loss in conjunction with other risk management techniques. With proper use and awareness, the trailing stop loss can be a valuable asset in a trader’s toolbox.