Trailing Stops Explained
A 1-minute lesson from the MarketPro academy, one of 22 in risk management.
A trailing stop is a stop loss that moves in the direction of a favorable trade as price advances, aiming to lock in gains while still giving the position room to develop. A trailing stop that follows too closely can exit a trade during a normal pullback before the larger move resumes.
A trailing stop is a stop loss that moves in the direction of a favorable trade as price advances, aiming to lock in gains while still giving the position room to develop.
Common Types
- Fixed distance trailing: the stop follows price at a set number of pips
- Volatility-based trailing: the stop distance adjusts based on recent volatility, widening or narrowing as conditions change
- Structure-based trailing: the stop moves up beneath recent swing lows in an uptrend, or above swing highs in a downtrend
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Step 8 of 10 on Risk Management Mastery
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