Definition
A trailing stop is a dynamic stop order that adjusts automatically based on price movements. For a long position, the trailing stop follows the price upward at a set distance (either a fixed dollar amount or percentage) but stays in place when the price falls. This allows investors to lock in profits while the stock rises and limit losses if it reverses. Trailing stops help remove emotion from sell decisions and can be particularly useful in trending markets.
Formula
Example
You buy a stock at $50 with a 10% trailing stop. As it rises to $60, your stop moves up to $54. If it then falls, your stop stays at $54. When the price drops to $54, the stop triggers and sells.
FAQ
What is Trailing Stop?
A stop order that automatically adjusts as the price moves favorably.
How do you calculate Trailing Stop?
A common formula for Trailing Stop is: 追踪止损价格（多头）= 下单后最高价 - 追踪金额
Why is Trailing Stop important?
Trailing Stop helps investors evaluate trading mechanics and make more informed decisions.