Orders & execution · Intermediate

Trailing Stop Orders

A trailing stop follows price up and never back down. The distance you pick decides everything, and every choice is wrong on some days.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A trailing stop is a stop-loss set at a fixed distance behind the market rather than at a fixed price. Each time price makes a new favourable extreme the stop moves to maintain that distance, and it never moves backwards. When price reverses far enough to reach it, it triggers as a market order. It is a way to stay in a trend without having to guess where the move ends.

What to remember

A trail always gives back its distance. A 45-pip trail on a 150-pip run keeps 105, because the exit sits 45 pips below the high by definition.
Tight trails win on days that end early and lose on days that continue. On a 60-pip ATR, a 20-pip trail exits a routine pullback that a 45-pip trail ignores.
The MT4 and MT5 built-in trail runs on your computer, not the broker server. Close the platform and it stops following price.
A trail is for open-ended moves. Where the trade has an obvious destination, a resting take-profit returns more than a trail that walks you out on the pullback before it.

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What a 20-pip trail costs on a 60-pip ATR day

A trailing stop is a stop-loss that follows price when the trade moves in your favour and stays put when it does not. It is set as a distance behind the market rather than at a fixed price, so the exit level rises with a long position and falls with a short one.

The distance is the entire decision, and it is easiest to see with a number attached. Take USD/CAD with a 14-day average true range of 60 pips. You buy at 1.3600 with an initial stop at 1.3570 and price runs to 1.3670.

A 20-pip trail now sits at 1.3650. A 25-pip pullback, entirely ordinary inside a 60-pip day, closes you at 1.3650 for 50 pips. Price then resumes and reaches 1.3750 without you.
A 45-pip trail, about three quarters of the daily range, sits at 1.3625. The same pullback to 1.3645 does not touch it. Price reaches 1.3750, the trail follows to 1.3705, and the next pullback closes you for 105 pips.

On that day the loose trail returned twice as much. Now run the day where price stalls at 1.3670 and reverses straight through your entry. The tight trail banks 50 pips, the loose one banks 25. Neither setting is correct. The tight trail wins on days that end early and loses on days that continue, and there is no way to know in advance which kind of day you are in.

The ratchet: it moves one way and stays there

Mechanically a trailing stop is simple. You specify a distance, as a number of pips or points, a cash amount, or a percentage. Each time price makes a new favourable extreme, the stop is moved to keep that distance. When price moves against you, the stop does not move back. When price finally reaches it, the stop triggers.

Two consequences fall out of that ratchet.

A trail always gives back its distance. A 45-pip trail on a 150-pip run keeps 105 pips, because the exit is by definition 45 pips below the high. It is the cost of not having to guess the top.
It cannot improve a losing trade. Until price moves far enough in your favour for the trail to clear your entry, a trailing stop is just your original stop.

Most platforms also let you set a step, so the stop only moves once price advances a set amount. That stops the level being rewritten on every tick, which matters more than it sounds if you are on a slow connection.

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Fixed distance, percentage, or a multiple of ATR

The three common ways of setting the distance behave very differently.

Fixed pips or points. Predictable and easy to size around, but blind to conditions. Forty pips is generous on a quiet Tuesday and negligible on a central bank day.
Percentage. Scales with price, which suits instruments that range over orders of magnitude. On a $40 stock a 3% trail is $1.20; on a $400 stock it is $12. It does not scale with volatility, only with price level.
ATR multiple. Ties the distance to how much the instrument is currently moving, so it widens automatically in fast markets and tightens in calm ones. Multiples between 1.5 and 3 times a 14-period ATR are a common starting range.

ATR is the setting most likely to survive a change in conditions, because the failure it prevents is the one that does most damage: a distance chosen in a quiet week and left running into a volatile one. Use the pip calculator to convert whichever distance you choose into the cash it represents at your position size, because that is the number you actually experience.

Whether it lives on the broker server or on your laptop

This catches people out and it is worth checking before you rely on one. On MT4 and MT5 the built-in trailing stop is executed by the terminal on your machine, not by the broker. Close the platform, lose your connection, or let the laptop sleep, and the stop stops trailing. It remains wherever it last moved to, which may be a long way from where you assumed it was.

Some brokers offer a genuine server-side trailing stop that runs whether or not you are connected. If yours does, use it. If not, either leave the machine running or accept that the trail is only active while you are watching, in which case it is not doing the job you wanted from it.

Two further limits apply to any trailing stop, and they are the same limits every stop carries.

It becomes a market order when triggered, so it fills at whatever is available. In a fast move that can be several pips worse than the level.
It does not survive a gap. Price that jumps from 1.3700 to 1.3640 over a weekend never traded at your 1.3680 trail, so the fill is at the reopening price. A trailing stop protects unrealised profit, it does not lock it.

When a fixed target beats a trail outright

Trails suit trades where the upside is genuinely open ended and you have no credible target: a breakout into clear space, a strong trend on a higher timeframe, a position you intend to hold for weeks. They are poor at everything else.

If the trade has an obvious destination, a level, a measured move, the other side of a range, then a resting take-profit is better, because a trail will walk you out on the pullback before the level and hand you less than the plan said. In a range-bound market a trail is close to a machine for taking small profits repeatedly, which is the opposite of what people buy it for.

A practical middle setting, and the one most working plans converge on: take part of the position at a fixed target, move the stop to entry on the remainder, then trail the rest at an ATR multiple. That way the trade pays for itself at a known level and the trail only ever manages money you were prepared to give back. Size the whole thing first with the position size calculator, since the trail changes the exit, not the risk you took on at entry.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Trailing Stop Orders: questions

How far should a trailing stop be set?

Far enough that ordinary pullbacks do not reach it, which means tying it to current volatility rather than to a round number. A common approach is 1.5 to 3 times a 14-period average true range, so the distance widens automatically when the instrument starts moving more. A trail inside the typical pullback size will close most trades early, regardless of how good the entry was.

Does a trailing stop lock in profit?

It protects unrealised profit rather than locking it. The stop only triggers when price reaches the level, and if the market gaps past it, as happens over a weekend or on an unscheduled announcement, the fill happens at the reopening price instead. A triggered trailing stop also becomes a market order, so a fast move can fill it several pips worse than the level shown.

Is a trailing stop better than a fixed take-profit?

They solve different problems. A trail suits a move with no obvious destination, such as a breakout into clear space or a strong higher-timeframe trend, because it lets the trade run without you having to pick a top. A fixed target is better when there is a level the move is plausibly heading to, because a trail will often exit on the pullback just before that level and return less.

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