What is a trailing stop?

<p id="isPasted">A trailing stop is a type of order designed to freeze profits or limit losses when a trade moves favorably. Stops only move when the price is favorable. Once it moves to block a profit or reduce a loss, it doesn't backtrack in the other direction.</p><p>Here's how it works. When the price goes up, it takes a while. &nbsp;Then when the price finally stops rising, the new stop-loss price remains at the level it was dragged to, thus automatically protecting an investor's downside, while locking in profits as the price reaches new highs. Trailing stops can be used with stock exchanges, options, and futures that support conventional stop-loss orders.</p>

<p id="isPasted">A trailing stop is one that adjusts automatically with market movements. Basically, it will follow your position if the market moves in your favor and will lock in your profits and close the position if the market moves the other way.&nbsp;</p><p>The trailing stop is set the same way as a normal stop via the deal ticket. As with a normal stop, a trailing stop requires setting the stop distance and the trailing step. In order for your trailing stop to move along with the market, it must move by a certain number of points.&nbsp;</p>

<p id="isPasted">With trailing stop-loss orders, you are able to protect against uncertain losses while raking in more profits than with traditional stop-loss orders.</p><p>If the stock price moves up (assuming you have a long position), the traditional stop-loss order remains static, leaving your position at greater risk.&nbsp;</p><p>Trailing stop loss, however, also moves up with the share price when you place an order (if you have a long position), based on the input that you entered.</p>

<p id="isPasted">A trailing stop is a type of order used in trading stocks, forex, and other financial instruments to help manage risk and lock in profits. A trailing stop order is an automated order that adjusts the stop-loss level as the price of the asset moves in the trader's favor.</p><p>In a traditional stop-loss order, the trader sets a fixed price at which they will sell their position if the market moves against them. However, with a trailing stop, the stop-loss level is set at a certain percentage or dollar amount below the current market price, and it moves up or down as the price of the asset moves in the trader's favor.</p><p>For example, if a trader buys a stock at $50 and sets a trailing stop of 10%, the stop-loss level would be initially set at $45 (10% below $50). If the stock price rises to $55, the stop-loss level would then move up to $49.50 (10% below $55), allowing the trader to lock in a profit of at least $4.50 per share.</p><p>In this way, a trailing stop can help traders limit their losses and protect their profits by automatically adjusting the stop-loss level as the price of the asset moves. However, it is important to note that trailing stops can also increase the risk of being stopped prematurely if the price moves against the trader before reversing in their favor.</p>

<p id="isPasted">A trailing stop loss order adjusts the stop price at a fixed percent or the number of points below or above the market price of a stock. Learn how to use a trailing stop loss order and the effect this strategy may have on your investing or trading strategy.</p><p>Note: Trailing stop orders may have increased risks due to their reliance on trigger pricing, which may be compounded in periods of market volatility, as well as market data and other internal and external system factors.</p>