JustChartsWhat Is a Trailing Stop and How Do You Set One?
A trailing stop is a stop-loss that moves with price as a trade goes in your favour but never moves back. On a long trade with a 30-pip trailing stop, if price rises 50 pips the stop rises 50 pips too; if price then falls 30 pips, the trade closes, locking in most of the gain. It protects profits without a fixed take-profit target.
Key facts
- Moves
- only in your favour, never back
- Fixed trailing
- set distance in pips or points
- ATR trailing
- distance = multiple of Average True Range
- Structure trailing
- move stop below each new swing low (longs)
- Trade-off
- tight = locks in more but exits early; wide = rides trends
How a trailing stop works
Buy EUR/USD at 1.1000 with a 30-pip trailing stop. The stop starts at 1.0970. Price rises to 1.1060, so the stop follows to 1.1030. Price then falls to 1.1030 and the trade closes with a 30-pip profit. Had price kept rising, the stop would have kept following.
Three ways to trail a stop
1. Fixed distance
Most platforms offer a built-in trailing stop in pips or points. It is simple but ignores market structure. On many platforms it only works while the platform is running — check whether your broker trails server-side.
2. Volatility (ATR)
Trail at 2–3 × the Average True Range below the highest price. The stop widens when volatility rises and tightens when markets calm down.
3. Market structure
For a long trade, move the stop to just below each new higher swing low; for a short, above each new lower swing high. This follows the trend’s own rhythm — see support and resistance.
Trade-offs
- Too tight, and normal pullbacks stop you out early.
- Too wide, and you give back a large part of the profit.
- Trailing stops suit trending markets; in ranges they often exit near the worst point.
- Like any stop, they can slip in fast markets.
Many traders combine methods: a fixed initial stop-loss, a move to break-even after a set gain, then a structure-based trail.
Frequently asked questions
Is a trailing stop a good idea?
In trending markets it can capture large moves while protecting profit. In choppy markets it often exits too early, so match the method to the market.
Does a trailing stop work when my platform is closed?
Not always. Some platforms trail the stop only while the terminal is open; others manage it on the broker’s server. Check your broker’s documentation.
What is a good trailing stop distance?
There is no single number. Base it on volatility (for example 2× ATR) or on chart structure rather than a fixed figure.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
Plan stops on a live chartThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.