A trailing stop is a form of stop-loss order, which can be said as a dynamic stop loss. The special feature of the Trailing stop is that it will move up gradually with profitable BUY orders, move lower down with profitable SELL orders, but if at any time, these profitable orders start to move in reverse, the trailing stop will not move in reverse, it only moves one way in the direction of increasing profits.

Why was Trailing Stop born?

Whether you are a long term investor or a short term trader, timing your exit is just as important as determining your entry point. In human emotional terms, the decision to enter an order is usually easier than it is to exit. This can be understood as in the case when we have a profitable order and it is time to take profit (TP), inside the greed emerges, wants to expand the TP a little more to earn one more. With little profit, or in case the order is losing money, always try to keep the order and expect the price to reverse.

But such emotional responses are not the best way to make buy/sell decisions in the marketplace. Those are nonscientific and disciplined traders. Many trading systems have their own techniques for determining the best time to exit a trade. But there are a few general techniques that help you determine the optimal exit time, which both ensures acceptable returns while also helping you avoid unwanted losses.

Trailing stops will help you lock a large part of the profits that the trader has made.

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