What is a 'trailing stop' order?

A trailing stop is a type of stop-loss order attached to a trade that moves as the price fluctuates. It is designed to lock in profits or limit losses as a trade moves favourably by a certain amount of pips, as set by the investor. It is important to note that trailing stops only move if the price moves favourably. Once it moves to lock in a profit or reduce a loss, it does not move back the other way.