You may have heard of a trailing stop loss if you have been trading on the stock market for many years. But what exactly is it? In the trading world, this type of stop is defined as an order that automatically increases with the stock price. The reason why a trailing stop order is so useful is because it keeps your position closed when the price of the stock goes down. In other words, it allows you to sell a stock at a certain price but doesn’t force you to exit the trade.
The trailing stop can help you capitalize on a trend or move in the stock market. By setting a preset price, you can sell your stock at a higher price than the original entry price. By using a trailing stop, you can also set a limit to the amount of profit you wish to make. You can adjust this limit according to your risk tolerance and investment expectations. In either case, the trailing stop will remain at the same percentage as the original entry price, keeping your profit margin intact.
Another free risk management tool is the trailing stop loss. This type of stop loss will only move when the market moves in your favor, increasing your unrealised gains and protecting your downside. Trailing stop loss placement can be a certain price, percentage of the market price, or simply the amount you’re willing to risk. Using a trailing stop loss is an excellent way to lock in an upside trade while limiting the downside risk.
Another type of trailing stop order is a sell trailing stop order. It places a stop price at a set amount below the market price and a trailing amount attached to it. If the market price goes up, the stop price increases by the trailing amount. When the stop price is hit, the sell trailing stop order will be executed and the market order will be submitted to the market. Trailing stop sell orders are also available through the Mosaic Order Entry Panel.
When using a trailing stop, you should remember to check the price before you make a trade. The price of a particular stock could change drastically, but a trailing stop will remain at the same price. If the market moves against you, the trailing stop will close your position. If the market rises, your trade will continue to grow. If it falls, it will automatically close your position. Therefore, a trailing stop can be a very useful tool in trading.
