Example of a trailing stop order
Let’s say that you think the DAX is entering into a bull market, so you decide to buy it at 12,555 with a trailing stop set at 12,505. This allows the DAX to move 50 points against you before the stop closes you out.
Since this is a trailing stop, you'll also need to enter a trailing step amount. The trailing step dictates how much the DAX needs to move before your stop moves with it. So, if you have set your stop to move every time the DAX moves five points, then it will move up to 12,510 when the DAX hits 12,560, and so on.
Suppose the DAX 30 hits a high of 12,590 before retracing – your trailing stop would have moved up to 12,540 and would be triggered if the market fell below this price. When your position closed, you would still earn a profit because your trailing stop has broken even.
If you had used a basic stop on the trade, it would have closed your position at 12,505, earning you a loss.