What is a trailing stop order?
A trailing stop order is a specific type of stop-loss that automatically follows your position if the market rises, securing your profit, but it will remain in place if the market falls – closing out your position if the market moves against you.
A trailing stop order does not set the stop level at a certain price, but rather at a certain distance away from the current market price. It would be placed below the current market price if you are opening a long position on an asset, and above the current market price if you are opening a short position. A trailing stop is set at a percentage level or certain amount of points away from the market price – this distance is known as the trailing step – and the stop will move to maintain that distance from the current price.