Trailing Stop
a.k.a. Trailing stop-loss
A stop-loss that automatically follows price as a trade moves in your favour, locking in profit while giving the trade room to run.
A trailing stop is a stop-loss on a leash. Set it, say, 30 pips behind price. As the trade moves your way, the stop follows, always staying 30 pips back. If price turns around, the stop stays put, and closes you out if it is hit.
It lets you ride a trend without guessing where it ends. Set it too tight and normal wiggles knock you out early; too loose and you hand back a big chunk of profit before it triggers.
A 30-pip trailing stop
- You buy GBP/USD at 1.2700 with a 30-pip trailing stop at 1.2670.
- Price rises to 1.2800. The stop trails up to 1.2770.
- Price slips back to 1.2770.
Bottom line: The stop closes the trade at 1.2770, locking in 70 pips, even though you never moved the stop by hand.
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