Let’s understand it with an example, A buy order of EUR/USD is placed at 1.1443 and trailing stop is set at for every 200 points that the price moves up, the trailing stop would also move up 200 points. If the price moves up 200 points, the stop loss will also move up 200 points. But if the price starts to fall, the stop loss doesn’t move.

In this above example, 1 lot of EUR/USD trade is entered at 1.1443 with 200-points trailing stop at 1.1423. If the price then moves up to 1.1473, the trailing stop would move to 1.1453. At 1.1473, the trailing stop would move to 1.1453.

If the price then moves back down to 1.1463, the trailing stop would stay at 1.1453. If the price continues down and reaches 1.1453, the trailing stop-loss order would be converted to a market order, and you would be able to exit the trade at about 1.1453 thus lock in 100 points profit.

The same works even for a short trade except that you are expecting the price to drop, so the trailing stop loss is placed above the entry price.

To set a Trailing Stop, right-click the open position in the ‘Terminal’ window and then specify your desired pip value (in points) of distance between the TP level and the current price in the Trailing Stop menu.

Your Trailing Stop will then become active. This means that if prices change to the profitable market side, Trailing stop will ensure the stop loss level follows the price automatically.

You can easily disable trailing stop loss by setting ‘None’ in the Trailing Stop menu. If you want to quickly deactivate it in all opened positions, just select ‘Delete All’.

The main key to remember while using a trailing stop successfully is to set it at a level that is neither too tight nor too wide.  If a trailing stop loss that is too tight that could mean the trailing stop is triggered by normal daily market movement, and hence the trade will get no room to move in the trader’s direction. A too tight stop loss will led to a losing trade, however a small one.

On the other hand, If a trailing stop that is too large then it will not be triggered by normal market movements, but it mean that the trader is taking on the risk of unnecessarily large losses, or giving up more profit than they need to.

A trailing stop locks in profit and limit losses but establishing the ideal trailing stop distance is a difficult task There is no ideal distance because markets and the way that stocks move are always changing. Despite this, trailing stops are effective tools.

As already discussed, trailing stop-loss orders can get you out of a trade too soon. It can happen in a situation when price is pulling back a bit, not actually reversing thus ending the trade too early. This is a major drawback of TS.

In order to prevent that scenario, trailing stops should be placed at a distance from the current price that you do not expect to be reached unless the market changes its direction.

Another drawback is that trailing stops does not protect you from any major market moves that are greater than your stop placement.

If you set a trailing stop to prevent a 10% loss but the market unexpectedly moves against you by 20%, then the trailing stop doesn’t help you because there won’t have been a chance for your stop to have been triggered and your market order to have been filled near the 10% loss point