What Is Cash Trigger In Trading

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Good day members of Tron Fan Club, it's nice of me to be writing here again in this prestigious community, today I'll be talking about Cash Trigger and I hope you enjoy my article, let's get started.

What Is Cash Trigger

A Cash Trigger is situation that triggers a trader to make rapid decision or action in his field of trading, those action can include buying or selling a certain assets or commodities. Most times, Cash Triggers are common in retail investors, they decide whether to make a sell a certain stock when it's higher than a specific price or buy a certain stock when it's lower than a specific price.

It's called cash trigger Because it's a type of action that triggers a certain trade which adds or removes cash to a trader's account. There are different types of cash triggers a trader can set for himself, these trades are, Stop-Buy orders and Stop-loss orders.

How Does Cash Trigger Works?

A cash trigger occurs at a price when an trader/investor takes action, a certain orders are placed at these levels and when the price of the preferred asset or stock reaches that predetermined level, they begin their trade. As an example, A trader might want to long a stock at $30, but wants to opt out of the trade if it eventually falls below $20, they will put a stop loss order at $20. The stop loss order gets them out of the trade when the price drops below $20, which also serves as the trigger price in this scenario.

It's advisable to note that a transaction can become a market order immediately the stop loss trigger is activated. This potentially means that the actual sale price may occur below your preferred Trigger point. This however becomes important due to the volatile stocks and market volatility because the sale price could end up being lower than the stop trigger.

Other Types of Cash Triggers

There are other types of cash trigger Which are "Knock-In and Knock-Out" orders. These are financial tools that execute under a specific time if a specific price is reached.

In a Knock In Order, it's only possible when it comes into the presence of an underlying assets which reach a knock in price. This eventually leads to more subscriptions being paid and newer rights or obligations in the new order.

In a knock-out order, the option is unavailable to exist if the asset reaches the Knock-out price. It triggers when a specific price is reached unlike the other cash triggers which are self imposed as mentioned above, these types of triggers are designed into the stocks.

Conclusion

That concludes everything about my article on cash trigger in trading. I hope you enjoyed reading ✅

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