| Understanding Trailing Stop Orders | | | | case, the Trailing Stop Loss order is now at $9.50 |
| A Trailing Stop order is an order you can place when | | | | because it will trail (follow) the stock price as it |
| trading stocks that can help minimize losses and | | | | moves up by the amount you set in dollars when |
| protect potential profits. It is a key component that | | | | you placed the initial trade, $1.00. |
| is available to help manage risk when involved with | | | | - If the price of the stock goes up to $15.00, the |
| online stock trading. | | | | trailing stop loss order would follow up to $14.00. If |
| Using a Trailing Stop order will also help keep | | | | the price of the stock now drops to $14.00, the |
| emotions out of your trading decisions. Emotions can | | | | Trailing Stop Loss order would stay at $14.00 and |
| often allow a profitable trade to turn into a loss, and | | | | would trigger and become a market sell order at |
| a losing trade to wind up becoming a bigger losing | | | | $14.00. The Stop Loss order does not adjust |
| trade. | | | | downwards in this case. |
| Once placed, the Trailing Stop order will adjust in | | | | A Trailing stop Loss order set in percentages works |
| price based on the settings that you set upon | | | | the same way, except in percentages instead of |
| initiation of the trade. | | | | dollars. |
| Some possible settings and types of orders include: | | | | A Trailing Stop "Limit" order works the same way as |
| - Trailing Stop Loss in dollars | | | | a Stop "Loss" order except that once the order is |
| - Trailing Stop Loss in a percentage | | | | triggered, it becomes a "Limit order" at a price that |
| - Trailing Stop Limit in dollars | | | | you specify instead of a market order. |
| - Trailing Stop Limit in a percentage | | | | There are "Stop" orders to help manage risk when |
| An example would be the following: | | | | buying stocks (going long), as well as when shorting |
| | | | stocks. When protecting your positions while buying |
| 1. You place an order to buy shares of "xyz" stock | | | | stocks, the orders are sometimes called "Sell Trailing |
| and are filled at a price of $10.00 per share. | | | | Stop" orders, and when helping protect any short |
| 2. You then place a "Trailing Stop Loss" order in | | | | positions you have, they are sometimes called "Buy |
| dollars, at $1.00 | | | | Trailing Stop" orders. |
| Possible scenarios: | | | | The "Buy Trailing Stop" order works the opposite of |
| - If the price of the stock goes to $9.00 or below, | | | | what I explained above. In other words, the price of |
| the Trailing Stop Loss order will get triggered and | | | | the "Stop" order will trail the stock price down, |
| turn into a market sell order and be sold at the best | | | | instead of up. |
| available price in the market. | | | | Conclusion: |
| - If the price of the stock goes up to $10.50, the | | | | Before deciding to use this type of order, be aware |
| Trailing Stop Loss order will move up and adjust as | | | | that "Trailing Stop" orders don't work during |
| the price of the stock rises above $10.00. In this | | | | Pre-market or Aftermarket trading hours. |