Trailing stop order.

In plain English

A trailing stop order automatically adjusts as a stock rises, staying a fixed dollar amount or percentage below the peak price. If the stock keeps climbing, the stop rises with it, locking in more of the gain; if the stock drops by the trailing amount from its high, the order triggers and sells. It is a way to protect profits without watching constantly or setting a fixed exit. The risk is that normal volatility can trigger a sale early, and in a fast drop the actual sale price can be worse than the trigger, since it becomes a market order.

01Why it matters

A trailing stop can lock in gains automatically, but ordinary swings can trigger it prematurely, so understanding how it works helps you set the trailing distance sensibly.

02The math, step by step

You set a 10 percent trailing stop on a stock at 100 dollars. It rises to 150, so the stop trails up to 135. If it then falls to 135, the order triggers and sells, protecting most of the run-up.

03What this is NOT

04Receipts

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