Trailing stop

### The mechanic, exactly A trailing stop follows price at a set distance while the trade goes your way, and **freezes** the moment price turns against you. The SEC describes precisely this in its investor bulletin: the trailing stop price adjusts, or trails, as the market moves in a favourable direction, and remains fixed when it moves unfavourably. At that point it is just an ordinary stop, sitting there waiting to be hit. It is a one-way ratchet. That is the entire point of it. Two consequences the platform will not warn you about: - When it fires, a trailing stop becomes a **market order**. The SEC is blunt that the stop price is not the guaranteed execution price, and that the execution can deviate significantly from it in a fast-moving market. What you locked in is an estimate, not a promise. - The SEC also warns, in plain language, that a short-term, intraday price move can trigger a stop. That single sentence is the whole problem with trailing stops, stated by the regulator. ### Why we trail structure, not pips A fixed trail, N pips behind price, is blind. It is the same distance in a dead session and in a news expansion. Volatility changes all day. Your trail does not. So it ends up too tight exactly when the market is finally moving, and too loose exactly when it is not. Trailing behind each new structure break in the trade's direction hands the distance-setting job back to the market. When price takes a genuine step and confirms it, your stop takes that step too. When it does not, your stop stays where it is. - Too tight, and you get clipped out of winners that still had room to run. - Too loose, and you are holding a wide stop with extra admin, giving back most of an open profit before it ever triggers. ### The three ways people get this wrong - Switching on the broker's automatic pip trail and never once asking what that distance means for this pair, this session, this trade. - Trailing on the wrong timeframe. Trail an MTF trade off 1M structure and you are not managing a position, you are reacting to noise with real money. Trail on the structure of the class you are trading, MTF on 15M, 30M and 1H, LTF on 1M, 3M and 5M. - Reaching for a trailing stop mid-trade to avoid pressing close. Our target is weak structure, and how you act at weak structure is decided before price gets there, not invented while you are staring at the P&L. A trailing stop does not make a trade better. It changes the question you are asking of it, from "did you reach my level" to "how far will you go before you stop going". If you are going to ask the second question, know that you are asking it, and know that the answer arrives as a market order. Source: [SEC Investor Bulletin, Stop, Stop-Limit and Trailing Stop Orders](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-15).