Trailing Stop Order Definition – What is Trailing Stop? | CFI

trailing stop order

Trailing stop orders are a special type of stop-loss order that trails with price fluctuations that come with the financial markets. Instead of being set at an absolute amount, the stop-loss price is at a certain percentage. If the price moves up, the stop-loss order moves up with the price. When the price stops rising, the trailing stop remains fixed at the new level that it was dragged to, enabling a trader to lock in more gains while minimizing losses.

 

While they may be beneficial during strong trends, they may lead to early exits if the market stalls and does a quick reversal before continuing in the main direction.

 

Key takeaways:

  • A trailing stop is designed to lock in profits or limit losses as a trade moves favorably.
  • It is especially important that during volatile times, a wider trailing stop is set.
  • Trailing stops can be set as limit orders or market orders.
Credit Financier Invest (Mauritius) Ltd is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest (Mauritius) Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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