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Trailing Stop

Trailing stops are designed to follow the market price of a stock by a percentage amount or fixed dollar amount. The higher the market price of the stock, the higher will move the trailing stop.

Additional Comments:

If the stock's market price moves lower, the trailing stop will not move. The concept is that you can merely set the maximum amount that a stock can move lower to trigger the stop.

Once the market price of the stock touches or falls below the trailing stop price, the stock is then sold at market to the next willing buyer.

They are virtually guaranteed to take you out of a position. Each little up tick in a stock's price will pull the stop loss order higher and higher, eventually triggering the stop on the next downward tick of the stock's market price.

See also floating stop.

Related Terms:

Trailing Stop Loss
Using a trailing stop loss allows the trader to maximize profits on a stock as it ...

Stop Market
This type of stop loss order is known by various names, such as "stop," "stop loss," ...

Stop Limit
This is an order that says once the stock's market price touches or goes below the ...

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