What is a Trailing Stop?
A Trailing Stop protects your gain in a position and will automatically close when the stock reaches your amount or percentage.
Imagine you purchased 100 shares of Caterpilar at $100.00 per share; the current price is $105.00 You want to lock-in at least $5 of the per share profit you’ve made but wish to continue holding the stock, hoping to benefit from any further increases. To meet your objective, you could place a trailing stop order with a stop value of $2 per share.
As long as Caterpilar keeps going up, your trailing stop will increase and once Caterpilar drops $2.00 from its peek, the trailing stop order will take effect.
Trailing Stop will not protect your position after hours or pre-market.
