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Trailing Stop

In short

A dynamic stop-loss that moves up as price rises but never moves down — locks in profits automatically

A trailing stop follows your stock's price upward. If the stock rises from $100 to $150, a 15% trailing stop moves from $85 to $127.50. If the price then drops to $127.50, it triggers a sell — locking in a $27.50 profit instead of riding it back down. The stop only moves UP, never down.

Trailing stops are dynamic exit mechanisms that adjust with favorable price movement while maintaining a fixed distance (percentage, ATR multiple, or technical level) from the peak. Five strategies are available: Percentage (fixed % below peak), ATR-based (adapts to volatility), Chandelier Exit (ATR from highest high), Moving Average (stop at MA level), and Parabolic SAR (accelerating stop). The platform monitors positions at configurable intervals (1m/5m/15m/1hr) and can auto-execute or alert when triggered.

Formula

Stop Level = Highest Price Seen × (1 - Trailing %)

Thresholds

3-8%
Tight — day trading, volatile exits
10-15%
Standard — swing trading, most stocks
20-30%
Wide — long-term holds, volatile assets

Related concepts

  • Stop Order — A stop order is your automatic exit. Set a stop at $45 on a $50 stock — if it falls to $45, your order triggers and sells at market price. It protects you from bigger losses but can fill below $45 in a fast-moving market.
  • Risk Tolerance — Risk tolerance is how well you can sleep when your portfolio drops 30%. Some investors can stay the course; others panic-sell. High risk tolerance = more stocks. Low risk tolerance = more bonds and defensive assets.
  • Maximum Drawdown — If your portfolio hit $10,000 then fell to $6,000 before recovering, the max drawdown is 40%. It measures the worst experience a real investor would have endured.
  • Portfolio Volatility — Portfolio volatility measures how much your combined investments bounce around. Unlike individual stock volatility, it accounts for diversification — when some holdings go up while others go down, they partially cancel out, reducing overall portfolio risk.