← Glossary · Buying and selling
Trailing stop
A stop that automatically moves up as the price rises.
A trailing stop keeps a fixed distance to the highest price since you bought, for example 8 %. If the share rises, the stop moves up with it; if it falls, the stop stays put. When it is hit, the position is sold.
That locks in part of a gain without constant watching. Too tight a distance and normal swings sell you out; too wide and you give back much of the gain. Not every broker offers trailing stops.