Trailing Stop

What is a Trailing Stop?

Trailing Stop Profit protects a profit, but let a winner run as long as possible.

The trailing stop, as a part of your exit strategy, is a stop that moves in the direction of the Trend, which is up for a long trade and down for a short trade. An ideal stop is one that allows enough "room to move" and hence allows the profits to run.

The most basic technique for establishing an appropriate exit point is the trailing-stop technique. Very simply, the trailing stop maintains a stop-loss order at a precise percentage or number of points below the market price (or above, in the case of a short position).

The stop-Profit order is adjusted continually based on fluctuations in the market price, always maintaining the same percentage or points below (or above) the market price. The trader is then "guaranteed" to know the exact minimum profit that his or her position will garner.

Trailing Stop Orders are a helpful way to not only protect a position, but to protect what you might gain as well.