WHAT IS A TRAILING STOP ORDER
A trailing stop order is a type of stop-loss order that automatically adjusts as the asset's price moves in favor of the investor. Instead of setting a fixed price for the stop-loss order, a percentage or a fixed amount is set below (or above, in the case of a short position) the current market price. As the asset's price rises (or falls, in a short position), the stop-loss level is adjusted accordingly.
For example, if you buy a stock at $100 and set a trailing stop order with a 5% margin, the initial stop-loss level would be $95. If the stock price rises to $110, the stop-loss level would automatically adjust to $104.50 (5% below $110). If the stock price falls, the stop-loss level does not adjust and remains at the last reached level.
This type of order is useful for protecting profits while allowing the asset's price to continue rising.
Would you like to know more about how to use this type of order in your investments?