Trailing stop-loss

As an investor, avoiding big losses is at least as important as making profits. For example, if an initial investment of £1,000 falls in value to, say, just £500 – a 50% drop – you’ll need to double your money just to break even. Here’s where stop-loss orders come in.

A conventional stop-loss will simply ensure you get out of the market at a fixed price above or below your initial trading price. However, a trailing stop allows you to keep more of your profits.

For example, say you set a trailing stop at 25%, having bought shares for £10 each. The first trailing stop-loss kicks in at £7.50. If the share price then rises to £15, the new stop-loss level becomes £11.25, locking in a £1.25 minimum profit even if prices fall. Usually you’ll pay a broker a bit more for this type of trailing stop-loss order.

MoneyWeek magazine

Latest issue:

Magazine cover
Heading higher?

Or are house prices set to fall?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

'Would you rather upset God, or have Him just ignore you?'

In the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


21 November 1969: The first permanent Arpanet link

A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.