Trailing Stop
Order TypesA stop-loss that moves automatically in the direction of profit as the market moves in your favor. It locks in gains while staying a fixed distance from the current price.
What Is a Trailing Stop?
A trailing stop is a dynamic Stop-Loss that follows the market price at a fixed distance. If you set a 30-Pip trailing stop on a long position, the stop moves up as the price moves up but stays fixed when the price moves down. This lets you capture more profit from trending moves while still protecting against reversals.
Trailing Stop Example
You buy EUR/USD at 1.0850 with a 30-pip trailing stop (initially at 1.0820). The price rises to 1.0880, so the stop automatically moves to 1.0850 (now at breakeven). The price continues to 1.0920, moving the stop to 1.0890. When the price eventually pulls back, the stop stays at 1.0890 and closes the position for a 40-pip profit instead of the 70-pip peak, but without needing to watch the screen.
Trailing Stop Considerations
Trailing stops work best in trending markets. In choppy, range-bound conditions, the trailing stop tends to get triggered by normal price fluctuations before the trade can fully develop. Many traders use a wider trailing stop distance (50+ pips) for longer-term trades and tighter distances for shorter timeframes. Some platforms also allow ATR-based trailing stops that adjust automatically to market volatility.
Related Terms
Stop-Loss
An order that automatically closes a position at a predetermined price to limit losses. The most important risk management tool in forex trading.
Take-Profit
An order that automatically closes a position at a predetermined price to lock in profit. It is the profit-side counterpart to a stop-loss.
Stop Order
An order to buy above or sell below the current market price. Stop orders become market orders once the trigger price is reached.