Trailing Stops: Percentage and Fixed-Offset Triggers, Uses, and Limits
Summary
A trailing stop adjusts its trigger as the market moves favorably, aiming to protect some gains while leaving room for a position to continue. The document describes two settings: a percentage distance from the market price and a fixed price offset. It also notes that an activation price can delay tracking until a chosen level is reached. In its sell examples, the trigger follows rising prices and fires after a reversal reaches the selected distance, at which point the order becomes a market order.
The article frames trailing stops as a way to automate exits when a trader cannot monitor a position continuously. It cautions that sideways prices can make the tool less useful, that the trigger can lag the market, and that a triggered market order may not fill as expected. Available position or margin and exchange or system restrictions can also affect execution. The examples explain mechanics, but the article does not test settings across assets or market conditions, so it offers no evidence that a particular offset improves results.
Key ideas
- A trailing stop moves its trigger with favorable price changes and can automate an exit after a reversal.
- Traders can specify the trailing distance as a percentage or a fixed price amount.
- An activation price can determine when the order begins tracking the market.
- Sideways markets, trigger lag, slippage, and execution restrictions can limit the order’s usefulness.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.