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You are here: Home / Crypto / What is a Trailing Stop Order?
What is a Trailing Stop Order?

What is a Trailing Stop Order?

November 2, 2022 by Andrea Fonseka

A trailing stop order is the same as a market order, but it does not expire until it reaches the price you specified. This is a great option for those who are looking to take advantage of the volatility of a stock. It follows a stock and places an order when it reaches a profit-making price. It is also beneficial for traders who are looking to protect themselves from reversals in a trend.

When using a trailing stop order, it is important to make sure that you use the right amount and width. Many traders make the mistake of placing their stop-loss too tight or too wide. A 10% trailing stop order will be adequate for most traders. If you decide to use a 20% trailing stop, you will likely end up with an order that is too wide and too easy to trigger.

Trailing stop orders are usually placed at the time of the initial trade, but they may also be placed after. This type of order helps you lock in your profits or limit your losses by recalculating the stop trigger on a continuous basis, usually based on a trailing amount you set.

Trailing stop orders are used to limit your maximum possible loss. They work by allowing you to place a pre-set order at a certain percentage of the market price. Essentially, if the market price moves against you, your order will be triggered and your position closed. This is very beneficial for traders looking to protect their profits and limit their losses.

The what is a trailing stop order can be set manually, or it can be set to work automatically with your trading platform. You can choose the price of your stop loss as well as the percentage distance from the market price. When the security price hits this amount, your stop order will shift to the new price available in the market.

 

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