# Trailing Stop Orders > A trailing stop follows the price by a set amount or percentage and only moves in your favour. Learn how it works, how to set the distance and common pitfalls. Source: https://learn.tradelabsai.com/orders/trailing-stop-orders/ Track: Orders and Execution · Level: Beginner · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Trailing Stop Orders", https://learn.tradelabsai.com/orders/trailing-stop-orders/ A trailing stop is a stop order that moves with the price. For a long position, it rises as the price rises, staying a fixed distance below the highest price reached, but it never moves down. If the price falls back by the trailing amount, the stop triggers and you exit. It lets a winning trade run while locking in more profit as it goes. ## How a trailing stop works You set the trail as a dollar amount, a percentage or, on some platforms, in ticks. **Example: A $3 trailing stop** You buy at $50. With a $3 trail, the stop starts at $47. Price rises to $55: the stop rises to $52. Price dips to $53: the stop stays at $52; it never moves down. Price rises to $61: the stop rises to $58. Price falls to $58: the stop triggers and you sell near $58, an $8 gain per share. For a short position, the logic is reversed: the stop starts above the price, moves down as the price falls and triggers if the price rises by the trail amount. ## Trailing by amount, percentage or volatility | Method | Example | Behaviour | |---|---|---| | Fixed amount | $3 below the high | Same distance at any price | | Percentage | 8% below the high | Distance grows as price rises | | Volatility based | 2.5 × ATR below the high | Adapts to how much the asset normally moves | Broker trailing stops usually support amount and percentage. Volatility based trails, such as a "chandelier exit" that hangs a multiple of ATR below the highest high, are often managed manually or with a script. See [ATR (Average True Range)](https://learn.tradelabsai.com/indicators/atr/). ## Choosing the trailing distance The distance is a trade off: - **Too tight:** normal pullbacks stop you out early, and you miss the bigger move. - **Too wide:** you give back a large share of your profit before exiting. A good starting point is a distance beyond the asset's normal pullbacks in the trend you are trading. Review in your journal how far winners typically pull back before continuing, using maximum adverse excursion, and set trails just beyond that. See [MAE and MFE](https://learn.tradelabsai.com/risk/mae-and-mfe/). ## When trailing stops work best - **Strong trends,** where a trailing exit captures much of the move without guessing the top. See [Trend Following](https://learn.tradelabsai.com/strategies/trend-following/). - **Breakouts that run,** after an initial stop has done its job. - **Positions where you cannot watch the market** but want profits protected. They work poorly in choppy, sideways markets, where the price whipsaws through the trail repeatedly. ## Combining trailing stops with other exits Many traders combine methods: 1. Start with a fixed stop at the level where the idea is wrong. 2. Move the stop to breakeven once the trade reaches a set profit, such as 1R. See [Moving Your Stop: Breakeven and Trailing Stops](https://learn.tradelabsai.com/position-management/breakeven-stop/). 3. Take partial profits at a first target. See [Scaling Out and Partial Profits](https://learn.tradelabsai.com/position-management/scaling-out-and-partial-profits/). 4. Trail the stop on the remainder to catch any extended move. ## Things to know about broker trailing stops - **They become market orders** when triggered, so slippage applies, as with any stop. See [Stop Orders](https://learn.tradelabsai.com/orders/stop-orders/). - **Many only trail during regular hours,** and may not adjust to pre-market highs. - **Gaps** can still skip the stop entirely. - **Some platforms trail on the bid or ask,** not the last trade; check your broker's documentation. ## Common mistakes - **Starting the trail too tight** from entry, leaving no room for the trade to work. - **Manually overriding** the trail to give a fading trade "more room". - **Using trailing stops in ranges** where whipsaws produce a string of small losses. ## Frequently asked questions ### What is a good trailing stop percentage? It depends on the asset's volatility and your timeframe. A volatile stock might need 8% to 15%, a calm index ETF 3% to 5%. Volatility based trails adapt automatically. ### Does a trailing stop guarantee my profit? No. It locks in a minimum exit level, but because it becomes a market order, fast markets and gaps can fill it below the stop price. ### Should I use a trailing stop on every trade? They suit trending trades. In range trading, fixed targets usually work better. ## Sources - U.S. Securities and Exchange Commission, [Trailing stop order](https://www.investor.gov/introduction-investing/investing-basics/glossary/trailing-stop-order) ## Continue learning - Next lesson: [Time in Force: Day, GTC and GTD Orders](https://learn.tradelabsai.com/orders/time-in-force/) - Previous lesson: [Stop-Limit Orders](https://learn.tradelabsai.com/orders/stop-limit-orders/) - Related: [Stop-Limit Orders](https://learn.tradelabsai.com/orders/stop-limit-orders/): A stop-limit order becomes a limit order when its stop price trades. Learn how to set the stop and limit, when it protects you and when it can fail to fill. - Related: [Stop Orders](https://learn.tradelabsai.com/orders/stop-orders/): A stop order becomes a market order once a trigger price trades. Learn how stop losses and buy stops work, where to place them and why stops can slip. - Related: [Moving Your Stop: Breakeven and Trailing Stops](https://learn.tradelabsai.com/position-management/breakeven-stop/): Moving your stop to breakeven removes risk but can cut winners early. Learn when to move stops, alternatives like partial breakeven, and rules that work. - Related: [Exit Mechanics](https://learn.tradelabsai.com/position-management/exit-mechanics/): Exits decide most of your results. Learn the main exit types: stops, targets, trailing stops, time exits and signal exits, and how to combine them in a plan. - Related: [ATR (Average True Range)](https://learn.tradelabsai.com/indicators/atr/): The Average True Range measures how much an asset typically moves per period. Learn the true range formula, how to use ATR for stops, position sizing and filters. - Related: [Trend Following](https://learn.tradelabsai.com/strategies/trend-following/): Trend following buys markets that are rising and sells those that are falling. Learn the rules, the evidence, typical results and why patience pays. - Related: [Scaling Out and Partial Profits](https://learn.tradelabsai.com/position-management/scaling-out-and-partial-profits/): Scaling out means closing a position in parts at different prices. Learn common partial profit methods, the effect on expectancy and when it helps.