A trailing stop is a stop-loss order that automatically adjusts as the price moves favorably, locking in profits or limiting losses by a set amount of pips. It moves only in the direction of favorable price changes and does not revert if the price reverses. Trailing stops are stored locally on the trading platform, which must be running for them to function. Execution may be affected by slippage or gaps during high volatility or low liquidity.
How trailing stop works
| Market movement | What happens |
|---|---|
| Price moves in your favor | The trailing stop moves along with the price based on the set distance. |
| Price reverses | The trailing stop does not move backward. |
| Price reaches the trailing stop level | The position may be closed at the next available price. |
Important platform behavior
| Item | Explanation |
|---|---|
| Stored locally | The trailing stop is stored on your trading platform, not fully on the server. |
| Platform must remain running | The trading platform needs to stay open for the trailing stop to update. |
| One-way movement | The trailing stop only moves in the direction of favorable price movement. |
Important notes
- The trading platform must remain open and connected for the trailing stop to keep updating.
- During high volatility, low liquidity, or market gaps, execution at the desired price is not guaranteed.
- A trailing stop is a risk management tool, but it does not remove trading risk.