Trailing Stop Order: What It Is and How to Use It

When trading the financial markets, a trailing stop order is an advanced variation of the traditional stop-loss order. Unlike a fixed and specific stop-loss, a trailing stop order utilizes a trailing amount to determine when to submit a market order.

In this article, we’ll delve into the concept of trailing stop orders, explore how to use a percentage as a trailing amount, discuss the reasons for using a trailing stop loss, examine their pros and cons and compare trailing stop-loss orders to trailing stop limit orders.

Key Takeaways:

• A trailing stop order is an advanced variation of the basic stop-loss order that utilizes a trailing amount to determine when to submit a market order.

• Trailing stop orders dynamically adjust when the market moves in the trader's favor, offering a hands-free approach to risk management.

• A trailing stop limit is a variation of the trailing stop, allowing traders to gain a price guarantee upon execution.

What Is a Trailing Stop Order?