Trailing stops are dynamic stop loss orders that adjust as the price moves in the trader’s favor. Instead of staying fixed, the stop price “trails” the asset by a set percentage or dollar amount. This allows traders to protect profits while giving the trade room to grow if the market continues in a favorable direction.
Example:
A trader buys ETH at $4,000 and sets a trailing stop $100 below the current price. If ETH rises to $4,300, the stop moves up to $4,200. If the price then falls, the position closes at $4,200, locking in a $200 profit without manual intervention.