What does trailing stop mean in stocks
A stop order that can be set at a defined percentage away from a security's current market price.
A trailing stop is designed to protect gains by enabling a trade to remain open and continue to profit as long as the price is moving in the right direction, but closing the trade if the price changes direction by a specified percentage. A trailing stop can also specify a dollar amount instead of a percentage.
The following example illustrates how a trailing stop works. The key is to set the trailing stop percentage at a level that is neither too tight to prevent the trade being stopped before it has a chance to work nor too wide which if triggered, may result in leaving too much money on the table.
Trailing stops can also be used for other asset classes such as currencies. Like other stop orders, trailing stops can be set as limit orders or market orders.
Trailing Stop Definition & Example | Investing Answers
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Trailing Stop
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