Trailing Stop
A stop-loss that automatically moves in your favor as price advances, locking in profit while capping downside.
A trailing stop is a dynamic stop-loss that follows the best price your position achieves. You define a trail amount (dollar, points, or percentage). The stop ratchets up as price rises (for longs) but never moves back down.
When price reverses and drops by the trail amount from the peak, the order triggers as a market order.
Trailing stops let winners run while systematically protecting accumulated gains — useful in trending markets where you do not want to set a fixed take-profit target in advance.
Example
Long XYZ at $50.00 with a $2.00 trailing stop. Price rallies to $56.00 — stop moves to $54.00. Price then drops to $54.00 and the position closes, keeping $4.00 of the $6.00 gain.
Related Terms
Bracket Order
A single entry order packaged with a take-profit and a stop-loss; when one exit fires, the other is automatically canceled.
BeginnerStop Order
An order that becomes a market order once the asset trades at or through a specified stop price.
BeginnerStop-Loss Order
A stop order placed to exit a position at a loss before it grows larger. The primary tool for managing downside risk.
BeginnerTake-Profit Order
A limit order placed above a long entry (or below a short) to automatically lock in gains when a target price is reached.
Beginner