Trailing Stop

May 05, 2021

A trailing stop is a stop price that can be set at a defined percentage or dollar amount away from a security’s current market price. For long positions, the stop would be below the current market price. For short positions, this would be above the current market price.

Trailing stops only move in one direction because they are designed to lock in profit or limit losses.  For example on a long position as the market price rises, the stop price also rises.  If the market price falls, the stop price does not change.