<p>A <strong>trailing stop</strong> is a type of stop‑loss order that moves automatically as the market price moves in a trader’s favor, locking in gains while still protecting against adverse moves. Unlike a static stop‑loss that stays at a fixed price, a trailing stop follows the price by a set distance—either in points, ticks, or a percentage—so the stop level rises for long positions or falls for short positions as the trade progresses.</p>

<h2>How It Works</h2>
<p>When a trader places a trailing stop, they specify a trailing amount, such as 50 pips or 2 %. The platform then calculates the stop level based on the current market price minus (for longs) or plus (for shorts) that amount. If the price moves favorably, the stop level is updated to maintain the same distance from the new price. If the price reverses and touches the stop level, the order is executed, closing the position. STB Provider’s MetaTrader 5 platform lets traders attach a trailing stop directly to an open order or set it when placing a new trade, and the adjustment occurs in real time without manual intervention.</p>

<h2>Why It Matters for Traders</h2>
<p>A trailing stop helps traders protect profits without having to constantly monitor the chart. It reduces the emotional temptation to move a <a href="/NewSite/encyclopedia/stop-loss/" class="ency-link">stop loss</a> manually after a winning run, which can lead to premature exits or unnecessary risk. By automatically tightening the stop as the trade moves in‑the‑money, a trailing stop can improve the risk‑reward ratio of a strategy, especially in trending markets where prices sustain directional moves. It also works alongside a <strong>take profit</strong> order, allowing a trader to let winners run while still defining a clear exit point if the trend stalls.</p>

<h2>Example</h2>
<p>Consider a long EUR/USD position opened at 1.1000 with a trailing stop of 30 pips. The initial stop is set at 1.0970. If the price rises to 1.1050, the trailing stop moves up to 1.1020 (maintaining the 30‑pip distance). Should the price then retreat to 1.1020, the stop is hit and the position closes, securing a profit of 20 pips. If instead the price continues to 1.1120, the stop trails to 1.1090, locking in 90 pips of gain before any reversal.</p>

<h2>Key Takeaways</h2>
<ul>
<li>A trailing stop adjusts dynamically with price, preserving gains while limiting downside.</li>
<li>It removes the need for manual stop adjustments, reducing emotional decision‑making.</li>
<li>Most effective in strong trending environments; may be whipsawed in choppy, ranging markets.</li>
<li>Can be combined with a take‑profit target to define both upside and downside exits.</li>
</ul>