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Trailing Stops
A Trailing Stop (or rolling stop) is a stop loss order that moves with the price, when a postion moves into profitability.
So, if you buy a particular market and the price rises the stop loss price rises proportionally, but if the price falls, the stop loss price doesn’t change.
Why do individuals use Trailing Stops?
Individuals use Trailing Stops, quite simply, to lock in profits. When a market moves in a profitable direction, a trailing stop provides automated discipline to take profits should the market price change direction.
In addition it may encourage an individual to not take profits too early, by allowing a profitable position to run, knowing that if the market were to change direction, the position would be closed out.
How does it Work?
Example
If you buy a FTSE spread bet at 5560, you may want to place a Trailing Stop at 5540. If the FTSE price was to rise to 5590 the trailing stop would rise to 5570 (i.e. would rise point for point with the rising market).
If at any time the FTSE price falls, then the Trailing Stop order will stay at the highest price that it has achieved.
In this example, if the FTSE retraced back down to the entry level of 5560, the position would have been closed out, by the Trailing stop order at 5570. Trailing Stops can be placed on any of the Index, Currency, Equity and Commodity spread bets that are offered by ProSpreads.
Please note: Trailing Stops are not ‘guaranteed’ stops and can only be placed online – they are not available for telephone orders.
To take advantage of Trailing Stops in your trading open an account today
For more information on Trailing Stops, please
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