Trailing Stop

A trailing stop is a stop order whose trigger price follows the market at a set distance, in one direction only. On a long position it moves up as the price rises and stays put when the price falls, so the order fires once the market has retraced by the chosen distance from its best level. It is a way of holding a position while letting the exit level ratchet, rather than fixing the exit in advance. The distance is the whole decision: too tight and ordinary noise closes the position, too wide and much of the gain is given back before it triggers. A trailing stop is still a stop, so it inherits the same limits — it fires into whatever liquidity exists at that moment, and in a fast market the fill can be well past the trigger.