Trailing Stop Loss :-
A trailing stop loss allows traders to set a predetermined loss percentage that they can incur when trading on a financial instrument. It plays an efficient role in managing risks and providing profit protection. Consequently, these are also known as profit-protecting stops. When the price of a financial instrument rises or falls, the stop price moves up or down accordingly.
When an investor takes a long position, a stop price is set at a fixed distance below the market price of a financial instrument. It puts a cap on the amount of loss that a trader can suffer. But, they do not set a ceiling on the potential gain that can arise due to the increase in market price. Hence, it allows traders to take away profits until the market turns against them.
Written by OM MAURYA SIR
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