![]() ![]() ![]() Let's say you bought a stock at $25 per share and would like to protect it with a trailing stop. For trailing stop orders to sell, it's vice versa: the stop value follows the market price when it rises, but remains unchanged when it falls. Trailing stop orders to buy lower the stop value as the market price falls, but keep it unchanged when the market price rises. ![]() Once placed, the stop value is constantly adjusted based on changes in the market price. For those to sell, it is placed below, which suggests the negative offset. For trailing stop orders to buy, the initial stop is placed above the market price, thus the offset value is always positive. The initial trailing stop value is set at a certain distance (offset) away from the immediate market price of the instrument. You can use these orders to protect your open position: when the market price reaches a certain critical value (stop price), the trailing stop order becomes a market order to close that position. Trailing stop orders can be regarded as dynamical stop loss orders that automatically follow the market price. ![]()
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