A trailing stop is a stop-loss that you move in the direction of the trade as it goes your way. It locks in part of the gain while still letting a good move run.
It only ever moves one way. For a buy trade it can go up, never down — like a ratchet.
A simple staged approach
Many traders trail in stages rather than from the first tick:
| Trade has moved | What the stop does |
|---|---|
| Less than the original risk | Stays where it was — moving it now gets you shaken out by noise |
| By the original risk (1R) | Moves to breakeven (your entry price) — the trade can no longer lose |
| By about 2R | Trails a volatility distance behind the highest close |
| By 3R or more | Trails just below each new higher swing low |
Example. Buy at ₹500, stop at ₹480 — risk ₹20 (1R). - Price reaches ₹520 (+1R): stop moves to ₹500. - Price reaches ₹540 (+2R): stop trails to, say, ₹522. - Price makes a higher low at ₹535 and runs on: stop moves just under ₹535.
Ways to trail
- Swing lows / highs — move the stop below each new higher low. Natural for clear trends.
- Volatility (ATR) — keep the stop a set multiple of the average daily range behind the highest close. Gives volatile stocks room.
- Moving average — exit on a close beyond a chosen average (e.g. 20-day for fast trends, 50-day for slower ones).
- Chandelier exit — highest high since entry minus about 3 × ATR; a looser trail for strong, volatile runs.
Common mistakes
- Trailing too tightly. A stop inside normal pullbacks exits good trades early.
- Trailing on intraday spikes. Many traders update on closing prices to avoid reacting to noise.
- Moving it back down after a pullback. That turns a trailing stop into no stop.
- Gaps still apply. A trailing stop is still a stop order; a gap past it fills at the next available price.
Where NEOGreeks helps
The Smart Money Board marks new structure breaks and swing levels through the day — the higher lows and lower highs that swing-based trailing stops are moved to.