Trailing Stop Orders

A trailing stop order is a type of stop-loss order that automatically adjusts as a position moves favorably, aiming to help lock in gains while still allowing room for a trade to continue moving in the intended direction.

How a Trailing Stop Works

Rather than staying at a fixed price like a standard stop-loss, a trailing stop is set at a specific distance behind the current market price—either a fixed dollar amount, a percentage, or a number of points. As the price moves favorably, the stop level moves with it, maintaining that same distance. If the price reverses, the trailing stop stays in place rather than moving backward, and if price reaches the stop level, it triggers, closing the position.