Stock Market Glossary
Trailing stop
Dynamic stop loss that moves with the price in the direction of profit.
In brief: Dynamic stop loss that moves with the price in the direction of profit.
Meaning in practice
A trailing stop follows the price at a fixed distance (absolute or percentage) – as soon as the price turns, it stops and is triggered. He hedges profits without closing the position prematurely.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
In practice, the term should be linked to a specific trading plan: entry, exit, position size and costs belong together. In short time frames, spread, slippage and delayed execution can quickly outweigh the theoretical benefit of an observation.
What to keep in mind
Write down which observation confirms or invalidates your assumption before trading. This keeps the term a decision-making tool rather than a retrospective justification for risk already taken.
