What They Are, How To Use Them in Trading
Flying a plane is easy. Landing it is the challenge. Similarly, profitable trading is all about the exit. It can be hard to watch a market reverse course and wipe out all—or even a significant chunk—of the profits from a formerly winning trade. But in a trending market, how do you know when to exit?
That’s when you need a trailing stop. The trick is finding a technique that strikes the right balance between letting a profitable position run and protecting profits from a reversal without getting stopped out by the market’s normal ebb and flow. This is especially important in trend-following strategies, when the idea is to follow the market as long as it’s trending.
Key Takeaways
- Trailing stops are meant to protect profits in a…
