Order Type
Trailing Stop — Definition & Example
A stop order that adjusts in the direction of profit as price moves favourably — never against the position.
A trailing stop sets a fixed distance (in points or percent) below (for longs) or above (for shorts) the current price. As the price moves favourably, the stop ratchets to follow at that distance. If the price moves adversely, the stop stays put. This lets winning trades run while protecting gains, addressing the common premature-exit problem.
Example
Long at ₹500 with a 2% trailing stop. Stop initially at ₹490. Price rallies to ₹520; stop trails to ₹509.6. Price reverses to ₹510; stop stays at ₹509.6 and triggers, locking ₹9.6/share gain.
Related
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