Trailing stop
Family II · Orders
Not to be confused with stop loss, stop limit order, stop order.
Trailing stop is a stop order whose trigger is not fixed at one price but is recalculated as the market moves. The trigger sits a set distance — measured in points, pips, ticks or a percentage — behind the best price reached since the order was placed. If the market reverses by that distance, the order becomes a market order and is filled at the next available price.
How the trigger moves
A trailing stop has two parameters: the trail distance and the direction of the position it protects. For a long position the trigger is placed below the market and rises as the market rises; it never falls. For a short position the trigger is placed above the market and falls as the market falls; it never rises.
The distance is usually expressed as a fixed number of points or pips, or as a percentage of the current price. Some venues also offer a trailing amount in currency terms. The trail distance is not the same as the distance from the entry price, so the trigger can end up above the entry for a long trade once the market has moved far enough.
Worked example
Execution and practical limits
Once triggered, a trailing stop normally becomes a market order. The fill price can therefore differ from the trigger price, especially in fast markets or around gaps; the locked-in figure in the example is the trigger level, not a guaranteed execution price.
Trailing stops are not supported on every order type or every market. Some venues restrict them to certain asset classes, require a minimum trail distance, or cancel them at the end of a session. Whether a trailing stop can be attached to an existing position, and whether it is held on the broker's server or on the trading platform, varies by provider.
Often confused with
- stop loss
- A stop-loss is a fixed trigger that stays at one price unless it is amended manually, whereas a trailing stop recalculates its trigger as the market moves; the visible sign is that the trailing stop's trigger level changes on the order ticket while the stop-loss level does not.
- stop limit order
- A stop-limit order becomes a limit order when triggered and may go unfilled if the market gaps past the limit, while a trailing stop becomes a market order and fills at the next available price; the visible sign is the presence of a limit price alongside the stop price on the order ticket.
- stop order
- A stop order is the general category of order that becomes a market order when a trigger is touched, and its trigger is fixed at entry, whereas a trailing stop is a stop order whose trigger is dynamic; the visible sign is a trail-distance field on the order form.