Trailing stop-loss

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

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.

Most Popular

Five unexpected events that could shock the markets in 2022
Stockmarkets

Five unexpected events that could shock the markets in 2022

Forget Covid-19 – it’s the unexpected twists that will rattle markets in 2022, says Matthew Lynn. Here are five possibilities
31 Dec 2021
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Tech stocks teeter as US Treasury bond yields rise
Tech stocks

Tech stocks teeter as US Treasury bond yields rise

The realisation that central banks are about to tighten their monetary policies caused a sell-off in the tech-heavy Nasdaq stock index and the biggest…
14 Jan 2022