Trailing Stop
A trailing stop is a stop order that can be used to let your winner ride while at the same time cutting your losses short. Of course those two things can be helpful in the stock market. What a trailing stop is basically an advanced version of a stop order. The idea behind it is you can set a stop a certain percentage below the price of the stock, say 5%. This way the stop level will follow the stock up when it goes up but not pullback when the stock pulls back. This order will be used when you think a stock is going to make a huge run. You can buy the stock and put a trailing stop on it. This allows you to make money when the stock is heading up and get out when the stock starts to pull back. This is such a valuable order and can be helpful in so many ways. There are a couple things that are often overlooked. This order can be used for following a stock up or following a stock down. Also you do not have to set the stop at a certain percentage. It can also be set as a certain number. For example if a stock is at $100 you can buy it and use this order to exit when the stock goes down $5.
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