An investor use a Trailing Stop order to exit out of an established position, it is designed to allow an investor to specify a limit on the maximum possible loss without setting a limit on the maximum possible gain. Unlike conventional stop orders that remain fixed at a static price point, trailing stops incorporate an intelligent adjustment mechanism that responds to favorable price movements. When the investor places a trailing stop, they specify either a fixed dollar amount or percentage distance that the order should maintain below the market price (for long positions). As the security’s price climbs higher, the stop level automatically recalibrates upward, maintaining that consistent buffer you’ve established, but if the stock price falls, the stop loss price doesn\u2019t change, and a market order is submitted when the stop price is hit. This technique is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain. “Buy” trailing stop orders are the mirror image of sell trailing stop orders and are generally used to exit short positions. The Trailing Stop orders works with U.S equities, options, futures, FOPS, Warrants as well as Forex and certain and certain non-US products. <\/p>\n\n\n\n
In Desktop the investor creates an order ticket then clicks on \u201cAdvanced\u201d in the lower right-hand corner to bring up the Advanced Order Ticket window.<\/p>\n\n\n\n
Once the Advanced Order Ticket window is up the investor can adjust the quantity, in this case the investor would like to close half of their position. The position is located below the Bid and Ask. In the Description panel they choose Trailing Stop. The trailing price is based on the last traded price at the time of the order and tracks it throughout the lifetime of the order.<\/p>\n\n\n\n
The investor may choose to enter a stop price or leave it blank, if they leave it blank the Stop or trigger price will automatically be set to the last traded price minus the trail amount. Remember with a trailing stop the stop price will adjust accordingly if the market goes in the investor\u2019s favor but will never adjust to cause more than the maximum possible loss they initially define.<\/p>\n\n\n\n
Next the investor sets the trail amount in either dollar or percentage terms, in this case 3 percent They can then set the Time-in-Force to Day or GTC.<\/p>\n\n\n\n
For example, if the last traded price is $80, you set the trail to 50 cents and the STP to $78, the stock then rises to $83 your new STP price will be $82.50, and the order will be triggered if the stock price falls to $82.50. If, however, the stock price doesn\u2019t improve from $80 and starts to fall, a stop will be reached at $78.<\/p>\n\n\n\n
When ready the investor can either preview the order or click submit. Details of the order can be seen by clicking on the Orders tab in the Portfolio screen.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Trailing Stop order type allows investors to protect accumulated profits without limiting potential gains, striking an optimal balance between capital preservation and profit maximization by systematically implementing the “cut losses short and let winners run” principle without requiring constant monitoring or emotional decision-making.<\/p>\n","protected":false},"author":1134,"featured_media":232740,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":true,"footnotes":""},"contributors-categories":[13576],"traders-academy":[13127,13128,13132],"class_list":{"0":"post-232737","1":"trading-lessons","2":"type-trading-lessons","3":"status-publish","4":"has-post-thumbnail","6":"contributors-categories-interactive-brokers","7":"traders-academy-advanced-trading","8":"traders-academy-level","9":"traders-academy-trading-lesson"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n