Orders & Risk
Trailing stop
A stop loss that follows price at a fixed distance as the trade moves in your favour, locking in gains while leaving room for the trend to run.
Also called: trailing stop loss
In practice
You buy GBP/USD at 1.2600 with a trailing stop 30 pips behind. As price rises to 1.2700, the stop trails up to 1.2670. If price then reverses, you exit at 1.2670 — banking 70 pips — without ever having to click sell at the top.
Why it matters for traders
A trailing stop lets you ride a trend without needing to predict its end, automating the hardest part of trading: knowing when to take profit. Set it too tight and normal noise kicks you out early; set it sensibly and it can turn a single strong trend into your best trade of the month.
Common pitfall
The pitfall is setting the trail so tight that ordinary noise kicks you out of trends before they run, leaving you with many small scraps and none of the big move. A trailing stop must be wider than the instrument's normal noise — based on its average range, not a round number. Never trail a stop on a timeframe smaller than your trade's intended horizon, or you will be managed out of the trade you planned to hold.
Lessons that use this term
- Managing a trade in profit
Breakeven stops, when to move them, and trailing stops — locking in gains without strangling the trade.
Related terms
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