What Is a Trailing Stop Order?

A trailing stop order is a way to exit a trade when the price has retraced to a previous stop. The basic stop will only close a position if the price has not reached its previous stop, and any profit from an early exit will be lost. In this case, a trailing stop order is an effective exit strategy. Often, the stock will swing between resistance and support, so a trailing stop will give you some wiggle room to work your plan in.

If you are part-time or only want to trade a certain amount of stocks, a trailing stop order is a great way to limit risk. It’s important to remember, however, that a trailing stop order does come with risks. Common risks include: gaps, stock splits, and no market for the asset. If you pay close attention to the market, you’ll likely notice patterns. This means that your trailing stop order is likely to fail if a stock breaks a certain level.

If you don’t know what a trailing stop order is, don’t worry! All you have to do is look for it in the order form. There’s a drop-down for trailing stop. Choose an option, like Margin or Exchange. If you choose Exchange, your order will automatically trail, but will not be executed until price breaks a range. However, it’s a good idea to try using trailing stop orders in paper trading accounts first.

If you’re looking for a way to limit losses and preserve profits, a trailing stop order may be the best option for you. You can setup this order in one click, and it can help you to follow your exit strategy. After all, a trailing stop order will be more flexible than a normal stop order. It will track the movement of a stock price, adjusting its trigger price accordingly. If you’re going to use trailing stop order, make sure to check the market’s performance before using it.

Trailing stop orders have a number of downsides. The most obvious is that they can’t guarantee you a specific price. As they rely on third-party data, there are many factors that may affect their execution. A stock may be split, have a symbol change, or go off its price target. This may lead to premature trailing stop orders. If you’re placing a trailing stop order, it’s important to monitor it closely because it can result in an incorrect execution.

Another key benefit to using a trailing stop order is that it limits your losses to 5% of the total investment. It also allows you to lock in your profit. If the price of PayPal drops by 10%, your trailing stop will trigger a sell order. You’ll make a profit in the meantime. That’s what a trailing stop order is all about. It’s a great risk management tool. However, if you’re not sure whether or not a trailing stop order is right for you, check out some examples below to learn more.