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A trailing stop sell order sets the initial stop price at a fixed amount below the market price as defined by the Trailing Amount. As the market price rises, the sell stop price rises one-to-one with the market but always at the interval set initially by the trailing amount. If the stock price falls, the stop price remains the same. When the stop price is hit, a market order is submitted. Reverse this for a buy trailing stop order. This strategy may allow an investor to limit the maximum possible loss without limiting possible gain.
To create a trailing stop order
- Stop Price - This field is optional. By default, the initial Stop Price is calculated as: market price - trailing amount. You can modify the stop price, but if it is lower than the calculated value, it will be discarded when the order is submitted. Note that the value you enter may display in the Stop Price field even if it is not used.
- Limit Price - this value defaults to the current best bid/ask. The limit price will move with the trailing stop price based on the delta between the two prices (initial stop price - initial limit price = limit delta). If the limit price and stop price are equivalent, they will move together with a zero delta.