What Is Trailing Stop? Meaning & Example
Definition
A trailing stop is a stop-loss that moves in your favor as price moves in your favor, staying a set distance behind. It helps protect gains while letting winners run.
Related terms
A stop-loss is an order that closes a position automatically if price moves against you to a set level. It helps limit losses, though fast markets can cause fills worse than the stop price.
TrendA trend is the general direction in which a price is moving over time. Uptrends make higher highs and higher lows, while downtrends make lower highs and lower lows.
VolatilityVolatility measures how much and how quickly prices move. Higher volatility means bigger swings, which bring both more opportunity and more risk.
What is Trailing Stop?
A trailing stop is a stop-loss that moves in your favor as price moves in your favor, staying a set distance behind. It helps protect gains while letting winners run.
Can you give an example of Trailing Stop?
With a $3 trailing stop, if a stock rises from $50 to $60, the stop rises from $47 to $57.