Trailing Stop-Loss – Complete Guide

Have you heard about Trailing Stop Loss?

What is a Trailing Stop-Loss?

A trailing stop-loss is a dynamic stop order that automatically follows the market price as it moves in your favor. Unlike a fixed stop-loss, which stays at one price level, a trailing stop adjusts upward (for long trades) or downward (for short trades) as the market advances.

👉 Key benefit: it locks in profits while still allowing your trade to run if the trend continues.

How Does a Trailing Stop Work?

• Long trade example:

  • You buy Apple at $100.

  • You set a trailing stop at $2 (or 2%).

  • If Apple rises to $105, your stop automatically moves to $103.

  • If the price falls back to $103, the order is triggered and you exit with a $3 profit.

• Short trade example:

  • You short Tesla at $250.

  • Trailing stop = $5.

  • If Tesla drops to $240, your stop moves down to $245.

  • If price rebounds to $245, your position closes with $5 profit.

👉 The stop only moves in your favor – never against you.

Advantages of Trailing Stops

• Protects profits without needing constant monitoring.

• Allows winners to run longer than fixed take-profits.

• Removes emotional decision-making (fear and greed).

• Works well in strong trending markets.

Common Mistakes with Trailing Stops

• Setting the trail too tight → you get stopped out by normal volatility.

• Setting the trail too wide → you risk giving back too much profit.

• Using the same trailing value on all assets without considering volatility.

How to Set Up a Trailing Stop in Sterling Trader® Pro

1. Enter a Trade

   • Open a position (buy or short).

2. Open the Order Entry Window

   • Select Order Type → choose Trailing Stop (sometimes shown as TRAIL).

3. Define the Trail Amount

   • You can set it in:

     • Points (e.g., $0.50 below market price).

     • Percentage (e.g., 1% below current market).

4. Confirm the Order

   • The stop will follow the price automatically.

   • For a long position: if the stock moves up, the stop adjusts up.

   • For a short position: if the stock moves down, the stop adjusts down.

5. Monitor & Adjust

   • If the market becomes more volatile, you may widen the trailing distance to avoid being stopped out prematurely.

Practical Example in Sterling Trader® Pro

• You buy MSFT at $300.

• You set a Trailing Stop = $2.

• If MSFT goes to $305 → stop moves to $303.

• If MSFT then drops to $303 → order triggers, and you lock in $3 profit.

• If instead MSFT falls immediately to $298 → stop-loss executes, limiting your loss to $2.

✅ Pro Tip: In Sterling Trader, you can create keyboard shortcuts or hotkeys for trailing stop orders (e.g., “Buy 100 shares with 2% trailing stop”) to react instantly in fast markets.