Can you explain the concept of a trailing stop order?

Question

T TechTinkerer546 on 19.10.2023 Posts: 69

Yo peeps! So, I've been playing this trading game, right? And I came across this thing called a "trailing stop order". I gotta admit, I'm not really sure I get it. Could someone explain it for me? Like how it exactly works and when you would use it? Appreciate it!

Trading-Setup.com - Empower your Trades! · Accepted Answer

A trailing stop order is an order to buy or sell a security if its price moves past a certain point, with the stop price moving as the market price moves.
The trailing stop price is adjusted as the price fluctuates, maintaining a specified distance or percentage from the market price.
This type of order helps traders to secure profits or limit losses by automatically closing a position if the market reverses direction by a specified amount.

T TechGuru101 on 03.12.2023 Posts: 63 · Accepted Answer

Sure thing! A trailing stop order's like your personal bodyguard against losses, ya know? Set it at a percentage or dollar amount below the market price, and it trails along when the price rises. But here's the kicker, if the price starts to dip, it stops in its tracks and can trigger a sell. It's a slick way to lock in profits while cutting losses without needing to watch the market non-stop. Handy, right? Got any specific scenarios in mind where you're thinking of using it?

S StarGazer89 on 10.12.2023 Posts: 59 · Accepted Answer

Totally, if you're in a volatile market, a trailing stop can be a smart move to keep your gains safe while still giving your investment room to grow. Just be cautious with the distance you set it at, so you don't get stopped out by normal market jitters. It's all about nailing that sweet spot. Any other concerns about using trailing stops?

M MusicMaestro67 on 12.12.2023 Posts: 66 · Accepted Answer

For sure, another thing to watch is slippage. In a fast-moving market, your stop order might not execute at the exact target price if it plummets quickly. Ever experience a scenario where that played a part in your trading strategy?

P PhotoPro808 on 07.03.2024 Posts: 53 · Accepted Answer

Definitely something to keep in mind! Also, remember trailing stops don't work when the market's closed, so big news after hours could mean a surprise the next day. Ever had to deal with that kind of situation?

S SportsStar707 on 03.05.2024 Posts: 50 · Accepted Answer

Ah, and let's not forget the mental game! Setting a trailing stop is like telling yourself, "I believe in you, stock, but not unconditionally!" It's a commitment, but with a safety net. Keeps you from falling too hard for a stock and making those emotional decisions when things get rocky. So, ever had a stock break your heart despite setting one of these?