What is a Trailing Stop order?
A trailing stop order is a stop order that tracks the market price and allows you to predefine a constant or percentage. When the market price reaches the predefined point, a market order is automatically executed.
Description
Assume you hold a long position, the market price is $100, and you set a trailing stop order to sell at a 10% loss.
- If the price drops 10% from $100 to $90. your trailing stop order is triggered and converted into a market order to sell.
- If the price rises to $150 and then drops 7% to $140, your trailing stop order is not triggered.
- If the price rises to $200 and then drops 10% to $180, your trailing stop order is triggered and converted into a market order to sell.
Description
Assume you hold a long position, the market price is $100, and you set a trailing stop order to sell at a $30 loss.
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If the price drops $30 from $100 to $70, your trailing stop order is triggered and converted into a market order to sell.
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If the price rises to $150 and then drops $20 to $130, your trailing stop order is not triggered.
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If the price rises to $200 and then drops $30 to $170, your trailing stop order is triggered and converted into a market order to sell.
Description
Assume you hold a long position, the market price is $100, and you set a trailing stop order to sell at a $30 loss with an activation price of $150.
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If the price rises to $140 and then drops $30 to $110, your trailing stop order is not triggered because it isn't activated.
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If the price rises to $150, your trailing stop order is activated.
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If the price continues rising to $200 and then drops $30 to $170. your trailing stop order is triggered and converted into a market order to sell.