How to Use a Trailing Stop-Loss

A trailing stop-loss is a stop-loss that moves up with the price (for a long trade) but never moves down — so it locks in gains while giving a winning trade room to run.

How it works

Suppose you buy at ₹100 and set a trailing stop ₹10 (or 10%) below. If the price rises to ₹130, the stop automatically trails up to ₹120. If the price then falls, the stop stays at ₹120 and triggers an exit there — protecting ₹20 of profit. The stop only ratchets one way: up.

Why traders use it

• Rides trends — you don’t cap your upside with a fixed target; the stop follows the move.
• Removes emotion — the exit rule is mechanical, not a gut call.
• Protects profit — converts a paper gain into a protected one as price rises.

Setting the trail distance

• Too tight — normal volatility knocks you out early.
• Too wide — you give back a lot before exiting.

Many traders base the distance on a volatility measure like the ATR or a chart level, not a round number alone.

Caveats

A trailing stop doesn’t guarantee the exact exit price — gaps can fill below your stop. It’s a risk-management tool, best combined with position sizing. Education only, not advice.