RiskPicksWhat is a Trailing Stop?
A trailing stop moves with the price in your favor but stays fixed when price moves against you. You set a distance (fixed amount or percentage) from the current price.
Example
You buy at $50 with a $2 trailing stop. The stop starts at $48. If price rises to $55, the stop moves to $53. If price then drops to $53, you're stopped out: locking in a $3 profit instead of letting the winner turn into a loser.
When to use trailing stops
- Trend following: let winners run while protecting profits
- Momentum trades: ride the move without watching every tick
- Swing trades: especially useful for multi-day holds