Trailing stop losses can play a significant role in managing risk and protecting a trader's unrealized profits.
An alternative to placing a fixed price stop-loss or stop-limit order is to use a trailing stop.
With this technique, we will set our stop at a percentage or dollar figure above or below the market price. The stop will therefore move in line with changes in price and will lock in profits for as long as the trade continues to move in a profitable direction.
The idea of automatically locking in profits even while away from the trading screen is naturally attractive, and it can be a very effective strategy in trending markets.
It’s also important to note that we can enter trailing stops as either stop-loss or stop-limit orders. And the advantages and disadvantages of both need to be carefully considered in exactly the same way as when placing a fixed price stop.
Swing Trading for Beginners (Updated for 2022)
Swing Trading Strategies That Work