What it is — Trailing Stop
A trailing stop is a stop loss that moves automatically as your trade gains. You define a distance (say 30 pips); if price rises, the stop rises with it, always 30 pips behind. If price falls, the stop never moves back down — it can only ratchet in your favor.
It answers the oldest dilemma in trading: hold for a bigger move, or bank what is on the table? The trail does both — it keeps you in the trend while guaranteeing that an increasing chunk of the gain is protected.
Why it matters — Trailing Stop
- Trends pay the most. Trailing is the standard way to ride one without predicting the end.
- It converts open profit into locked profit step by step, removing the round-trip trade (winner → loser) that frustrates beginners.
- It is built into MT4/MT5. Right-click the open trade → Trailing Stop — no code needed.
A trailing stop at work, in pips
Long 0.04 lots of EURUSD at 1.0900, initial stop 1.0875. Switch to a 20-pip trailing stop — it follows the highest price by exactly 20 pips and never retreats. Price reaches 1.0920: the stop rises to 1.0900 — breakeven, the trade can no longer lose. Price continues to 1.0940: stop 1.0920, at least 20 pips ($8 at this size) is now locked. The reversal, whenever it comes, fills the order and the trade ends a winner or a scratch — never a loss after the first +20. The cost is equally exact: every retracement deeper than 20 pips ends the trade early, so the trail distance decides how much heat you must survive to collect the trend.
Choosing the distance — and what gaps do to trails
Set the trail wider than ordinary noise or it will bank nothing but scratches: our glossary’s real ATR reading was 14.3 pips hourly on EURUSD, so a 20-pip trail is barely 1.4×ATR — tight for a swing, reasonable for a momentum scalp; a volatility-scaled trail of 1.5–2×ATR is the calmer default (see ATR). And know the failure mode: a trail is a stop, and stops fill at the next price in a gap — a news spike can jump your 1.0920 trail and fill at 1.0912, banking 12 pips instead of 20 (the slippage page’s $14 lesson, pointed the other way). Trails automate discipline; they do not repeal market mechanics.
Frequently asked questions — Trailing Stop
What distance should I trail by?
Wider than normal noise, or you will be shook out by any pullback. A common start: 1.5–2× the 14-period ATR of your timeframe, or just below the last swing low.
What distance should a trailing stop use?
Wider than the noise you are trading through: a common anchor is 1.5-2x the timeframe's ATR. Too tight and normal wiggles end the trade; too wide and you donate most of the move back — measure with ATR, not with feel.
Do trailing stops work during news?
They execute, but not at the exact level — gaps and slippage fill them at the next available price. Expect the trail to protect direction, not decimals, and size so the slipped fill is still acceptable.
Does a trailing stop work if I close the platform?
The classic MT4/MT5 trail is managed by your terminal — it stops working if you log off. Broker-side server trails (or an EA like our Risk Guard) keep working while you are away.
Related terms — Trailing Stop
Related tools — Trailing Stop
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