Trailing stop

A trailing stop is a dynamic stop-loss order that moves with the market price. For a long position, if the price rises, the stop-loss level automatically adjusts upwards by a predetermined distance. If the price falls, the stop-loss remains fixed. This mechanism secures profits as a trade progresses favorably while limiting potential losses if the market reverses.

This order type allows traders to protect unrealized gains without constant manual adjustment. It helps prevent a profitable trade from turning into a loss if the market reverses after a significant move. For example, setting a 20-pip trailing stop on EUR/USD means the stop moves up by 0.0020 for every 0.0020 price increase. This automation supports disciplined risk management.