What is Trailing Stop?
A trailing stop is a stop loss order that moves dynamically with the price of the asset, maintaining a set distance below the current market price for long positions or above for short positions.
Trailing Stop Explained
Unlike a fixed stop loss, a trailing stop locks in profits as the trade moves in your favor while still protecting against reversals. It's expressed as either a percentage or dollar amount. As the price rises, the trailing stop moves up, but it never moves down.
Real-World Example
You buy a stock at $100 with a 10% trailing stop. The stock rises to $120 — your trailing stop is now at $108. If it drops to $108, you sell with an $8 profit. If it keeps climbing to $150, your stop trails to $135.
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