Glossary · Indicators

Trailing stop

An exit level that follows price as a trade moves in your favour, locking in part of the gain, and stays put if price turns.

By Sky Trade editorial teamUpdated November 5, 2026

In conventional trading a trailing stop is an exit order that moves with price. Buy at 1.0850 with a 20-pip trailing stop and the stop starts at 1.0830; when price rises to 1.0900 the stop rises to 1.0880; if price then falls back to 1.0880, you are out with a gain. The stop never moves backwards.

Traders trail stops by a fixed distance, by a multiple of ATR, or behind indicator levels such as Parabolic SAR dots or swing lows. The trade-off never changes: a tight trail protects more profit but is triggered by ordinary noise; a loose one rides trends longer but gives back more.

Higher/Lower trades work differently. A trade is settled by the price at expiry and the most you can lose is the stake, so there is no stop level to trail. The concept is still worth knowing, because many trend tools were designed around it and it explains why they behave as they do.

For a fixed-payout trader the equivalent discipline is choosing an expiry that fits the move you expect. See Parabolic SAR explained and the ATR entry.

Example

You buy EUR/USD at 1.0850 with a 15-pip trailing stop. Price peaks at 1.0895, lifting the stop to 1.0880; when price slips back to 1.0880, the position closes with a 30-pip gain.

Learn more in the academy

Parabolic SAR: dots, acceleration factor and trailing logic
How Parabolic SAR places its dots, what the 0.02 and 0.2 acceleration settings do, how it trails a trend, and why it whipsaws in sideways markets.

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