What Is a Trailing Stop?
A trailing stop is a stop loss that moves with price as a trade goes your way, locking in profit while giving the trade room to keep running. Instead of a fixed exit, your stop follows the move — and only triggers if price reverses by a set amount.
How it works
Say you're long and set a 20-point trailing stop. As price rises, the stop rises 20 points behind it. If price then falls 20 points from its high, you're stopped out — keeping most of the gain. It never moves against you, only in your favor.
Pros and cons
- Pro: lets winners run while protecting profit — no guessing the exact top.
- Pro: removes the emotion of when to exit a winner.
- Con: normal pullbacks can stop you out before the real move finishes.
- Con: too tight and noise takes you out; too wide and you give back a lot.
When to use one
Trailing stops shine in trending moves where you want to ride momentum. In choppy conditions they get whipsawed. Many traders combine a fixed target on part of the position with a trailing stop on the rest. Pair with solid position sizing.
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What is the difference between a stop loss and a trailing stop?
A stop loss is fixed at one price; a trailing stop moves with price in your favor to lock in profit, only triggering if price reverses by a set amount.
Is a trailing stop a good idea?
In trending moves, yes — it protects profit while letting winners run. In choppy markets it can stop you out early. Match it to the conditions.
Educational content only, not financial advice. Trading futures carries substantial risk of loss.