A trailing stop order helps limit your losses, similar to a traditional stop-loss order. However, unlike a fixed stop-loss, a trailing stop automatically adjusts as the market moves in your favor, helping you lock in profits while still providing downside protection.
When placing a trailing stop order, you need to set two key parameters:
Stop Loss: This is the initial distance from the market price where the stop order is placed. It can be defined in price units, percentages, ticks, or currency.
Trailing Step: This defines how much the market price needs to move in your favor before the stop loss is adjusted. If the market doesn’t move by at least this amount, the stop remains unchanged—acting like a standard stop-loss order.
Example: Trailing Stop Order Using Price Units
You buy 10 shares of stock XYZ at $190 per share.
You set:
Stop loss price: $180
Trailing step: $5
Scenario 1: Market rises to $195
The $5 move from $190 to $195 meets the trailing step condition.
Your stop loss adjusts upward from $180 to $185.
If the price continues to $200, your stop loss adjusts again to $190.
Scenario 2: Market rises to $194
The $4 increase doesn’t meet the $5 trailing step requirement.
Your stop loss remains at $180.
Scenario 3: Market drops to $185
The stop loss remains at $180.
If the price falls further to $180 or lower, the stop loss is triggered and your position is sold.
Scenario 4: Market rises to $220, then falls to $210
As the price reaches $220, your stop loss moves up to $210.
If the price drops to $210 or below, your stop order is triggered and your position is exited.
A trailing stop order is especially useful in trending markets, allowing you to ride profits while minimizing risk as prices move in your favor.
How to Place a New Trade with a Trailing Stop Order
Open a trade ticket by clicking the blue "Trade" button next to the instrument you want to trade.
Fill out the trade details, then click "Add Take Profit / Stop Loss"
Under the Stop Loss section, select "Trailing Stop."
Choose the unit type for your stop distance (e.g., Price).
Set the two key parameters:
Stop Loss: the initial distance from the current market price.
Trailing Step: how far the price must move in your favor before the stop adjust.
Set the order duration under the Duration section (e.g., GTC – Good 'Til Canceled).
Once all details are confirmed, click "Place Order" to submit your trade.
How to Add a Trailing Stop Order to an Existing Position
You can add a trailing stop to an open position by following these steps:
Go to the "Positions" tab in your trading platform.
Find the position you want to manage and click "Add" under the Stop column.
Under Stop Loss, select "Trailing Stop."
Choose the unit type for the stop distance (e.g., Price).
Set the two required parameters:
Stop Loss: the distance from the current price where the stop will be placed.
Trailing Step: the amount the market must move in your favor before the stop loss adjusts.
Click "Place Order" to confirm.
Trailing Stops for Short (Sell) Positions
Trailing stops also work for short positions, but in this case, the stop is placed above the current market price. As the price moves down in your favor, the stop will trail downward accordingly.
Importance of Live Prices
Since trailing stop orders adjust based on real-time price movements, access to live market data is essential. This ensures that your trailing stop reacts promptly to market changes and helps avoid execution delays due to outdated pricing.