A trailing stop order is designed to protect gains and limit losses. It enables your trade to remain open if it goes in your favour and close automatically if the price changes by a defined percentage or price amount.
In contrast to a normal stop order, a trailing stop order modifies the stop order strike price, as the asset price moves in your favour. When you place a trailing stop order, you need to set two parameters:
- Stop Loss order level, to determine a distance to the market (can be placed in different units: percent, price, ticks, or currency).
- Trailing step determines how much the asset price should move (in your favour) for the stop order to be modified.
In this article, we cover the following topics:
- Example of a trailing stop order
- Place a new trade that includes a trailing stop order
- Add a trailing stop to an existing position
- Live prices
Example of a trailing stop orderPrice unit exampleYou buy 10 shares of stock XYZ at USD 190 per share. You place a trailing stop at USD 180 and a trailing step at USD 1. Scenario 1: The price rises to USD 195: The stop loss is re-adjusted to USD 185 minimizing the potential losses. Scenario 2: The price declines to USD 185: Your stop loss stays at USD 180. Stop losses only move up on long (buy) positions. Scenario 3: The price rises to USD 250 and declines to USD 200: The stop loss was re-adjusted to USD 240 when the market price was USD 250, and the order was executed at USD 240 on the way down. Percentage unit exampleYou buy stock XYZ at a price of USD 100 per share. You set a trailing stop at 10% under the current market price. When placing the trade, your initial stop loss is therefore USD 90 with a distance of USD 10. You set a trailing step of USD 1. Scenario 1: The price of stock XYZ rises to USD 100.5: Since the price change is less than the trailing step, there are no changes to the order. Scenario 2: The price of stock XYZ declines to USD 95: Your stop loss remains at USD 90. Since you are long (you bought), the stop loss only moves if the price rises. Scenario 3: The price of stock XYZ rises to USD 200 Since the trade has moved in your favour and rose more than the trailing step, your new stop loss will be calculated at 10% under the market price. In this example, that would be at USD 180 (10% below USD 200). |
Besides percentage and price, you can use Currency and Ticks as units for your trailing stop order:
- When using Currency as a unit, you can specify a fixed amount you want to risk losing in the trade. You know precisely what you are risking which can provide clarity.
- Ticks are the smallest possible price movements in the market. Imagine a currency pair where each tick represents a change of USD 0.0001. If the currency pair moves from 1.1234 to 1.1235, that’s one tick. Ticks allow you to place trades based on very small price fluctuations. Read more about ticks here.
Place a new trade that includes a trailing stop order
- Open a trade ticket by clicking the blue Trade box next to an instrument
- After filling the ticket, click Add Take profit / stop loss
- Click on Stop loss and choose Trailing stop
- Choose the type of unit used to establish a distance from the market for the Stop, e.g., Price
- Set an amount or percentage
- Set the trailing step, determining how much the price should move to re-adjust the stop loss
- Determine the duration of your trade by navigating in Duration
- Click Place order to place your trade
Trailing stop for short positions Trailing stop orders work for short (Sell) positions as well, but here the trailing stop is placed above the current market price. |
Add a trailing stop to an existing position
Trailing stops can also be added to existing positions. This can be done the following way:
- Go to Positions
- Click Add under the Stop section
- Click on Stop Loss and choose Trailing Stop
- Choose the type of unit used to establish a distance from the market for the Stop, e.g., Price
- Set an amount or percentage for the stop loss to be executed under the current price
- Set the trailing step, determining how much the price should move to change the stop loss
- Click Place order to add the trailing step to your existing position
Live prices
Trailing stop orders rely on real-time market information. Having access to live prices ensures that your orders are executed accurately based on the most up-to-date data and minimizes the risk of placing orders based on outdated information.
Read about how to subscribe to live prices here
*Be aware that in volatile markets the price and time of order execution might be affected. Read more in our Order execution policy