Trailing Stop: What It Is and How It Follows Price

Trailing stop meaning

A trailing stop is a stop loss that moves with the price. It moves only in your favour. When the market moves for you, the stop follows at a set distance. When the market turns against you, the stop stays where it is.

The aim is to protect part of an open profit without choosing a fixed exit in advance. The trade stays open while the price keeps moving your way. It closes when the price falls back by your chosen distance.

A trailing stop does not make a trade safe. Leveraged forex and CFD trading can lose money fast. A trailing stop changes where you exit. It does not change the risk of the market itself.

How a trailing stop follows price

The behaviour depends on whether you went long or short:

• Long (buy) position: the stop sits below the price. As the price rises, the stop rises with it. If the price falls, the stop holds its level.
• Short (sell) position: the stop sits above the price. As the price falls, the stop moves down. If the price rises, the stop holds.

The distance is measured in pips or points (see pips, points and pipettes). For long positions the trigger normally uses the bid, and for short positions it uses the ask. On a wide spread the stop can therefore trigger sooner than the chart line suggests. See bid and ask for details.

To work out what a given distance means in money for your lot size, use the tools on our calculators page and enter your own instrument, lot and distance.

Fixed vs ATR-based trailing

Fixed-distance trailing

You choose one distance in pips or points, and the stop keeps that gap from the best price reached.

• Simple to set and easy to understand.
• The same distance applies in quiet and busy markets.
• In a calm market the gap may be too wide, so you give back more profit than needed. In a fast market it may be too tight, so normal swings close the trade early.

ATR-based trailing

ATR (Average True Range) is an indicator that measures how much an instrument has moved on average over recent bars. With ATR-based trailing, the stop distance is a multiple of the current ATR value.

• The distance widens when volatility rises and narrows when it falls.
• The stop adapts to the instrument and the timeframe you use.
• The result depends on the ATR period, the multiple and the timeframe. You have to set these yourself and test them.
• Standard MetaTrader trailing is fixed-distance only. ATR trailing needs an indicator-based script or Expert Advisor, or manual adjustment.

Trailing stop in MT5 and MT4

In MetaTrader 5 and MetaTrader 4, you usually set a trailing stop from the open position in the terminal. Right-click the position, choose the trailing stop option, and select a distance in points.

Know this about the built-in version:

• It runs in your terminal, not on the server. The stop moves only while your platform is open and connected. If you close the terminal or lose the connection, the stop stays at its last level and stops trailing.
• Once the stop has moved, the last level is saved as a normal stop loss on the position.
• Distances are in points, which are often smaller than pips. Check the instrument's digits before you choose a value.

You can practise first on an MT5 demo account to see how the stop moves before you use real money.

Limitations of trailing stops

• Slippage and gaps. When triggered, a trailing stop becomes a market order. In fast markets or across price gaps the fill can be worse than the stop level. See slippage.
• No profit is guaranteed. If the price turns before the stop has moved past your entry, the trade can still close at a loss.
• Early exits. A tight trailing distance often closes trades on ordinary noise.
• Choppy markets. In sideways markets a trailing stop can produce repeated small losses.
• Terminal dependence. The built-in MetaTrader trailing stop needs a running, connected terminal.

A trailing stop is one part of risk management. It works best together with sensible position size and a clear plan for the trade.

Frequent questions

What is a trailing stop loss?

It is a stop loss that follows the price at a set distance when the market moves in your favour, and stays fixed when the market moves against you.

Does a trailing stop work when MT5 is closed?

The built-in MetaTrader trailing stop does not move while the terminal is closed or disconnected. The last stop level stays on the position as a normal stop loss.

Is ATR trailing better than fixed trailing?

Neither is better in every case. ATR trailing adapts to volatility, while fixed trailing is simpler. Both depend on the settings you choose.

Can a trailing stop close a trade at a worse price?

Yes. In fast markets or at gaps the order can fill beyond the stop level because of slippage.

Can I use a trailing stop with a take profit?

Yes. You can set a take profit as well. The trade closes at whichever level the price reaches first.