📖 Financial Lexicon Term
What is Trailing Stop?
A dynamic stop loss order that automatically moves with the market price to lock in profits as a trade moves favorably.
Detailed Explanation
Unlike a static stop loss, a trailing stop follows the current market price at a set distance (e.g., 20 pips). If the market reverses, the trailing stop remains stationary. If the market continues in your favor, the stop moves up, guaranteeing a profit even if a sudden crash occurs.
💡 Practical Trading Example
You set a 15-pip trailing stop on a winning trade. As the trade goes 30 pips into profit, your stop loss moves to +15 pips, guaranteeing a win.