How do I use trailing stop-loss orders in trading?

How do I use trailing stop-loss orders in trading?

Trailing stop-loss orders are designed to protect your profits by enabling a trade to remain open and continue to profit as long as the market price is moving in a favorable direction.

Can you explain how to set a trailing stop-loss order?

Sure! You can set a trailing stop-loss order by specifying a trailing amount or percentage. For example, if you set a trailing stop of $2, the stop-loss will adjust upward as the price increases, maintaining a $2 distance.

What happens if the market price drops suddenly?

If the market price drops suddenly and hits your trailing stop-loss level, the order will trigger, and your position will be sold at the market price to limit your losses.

Are there any risks associated with using trailing stop-loss orders?

Yes, one risk is that in a volatile market, the price may fluctuate and trigger your stop-loss order prematurely, potentially resulting in a loss.