Trailing Stop Loss

A trailing stop loss is a dynamic risk management order that automatically adjusts the stop-loss level as the price of a security moves in the trader's favour, locking in progressively higher profits while still protecting against a reversal. Unlike a fixed stop loss set at a specific price, a trailing stop loss moves with the market — set a defined number of points or percentage below the highest price reached since entry. If a stock rises from ₹500 to ₹600 with a ₹30 trailing stop, the stop moves from ₹470 to ₹570. If the stock then falls to ₹570, the position is automatically exited, locking in the ₹70 gain. Trailing stops are particularly effective in trending markets where capturing a large move is the objective.