1. What is Trailing Stop Loss?

A trailing stop loss is an order type that adjusts automatically as the price moves favorably, maintaining a set distance (in price units) from the current price. It helps lock in profits while limiting potential losses.

2. How Does the Calculator Work?

The calculator uses the trailing stop loss formula:

Where:

• \( \text{Current Price} \) — The current market price of the asset
• \( \text{Trailing Distance} \) — The distance (in price units) to maintain below the current price

Explanation: As the price increases, the stop loss price follows at the set distance below. If the price falls, the stop loss remains at its highest point.

3. Importance of Trailing Stop Loss

Details: Trailing stops help protect profits during favorable price movements while limiting downside risk. They're essential for risk management in volatile markets.

4. Using the Calculator

Tips: Enter current price and trailing distance in the same price units (e.g., dollars, points). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between fixed and trailing stop loss?
A: Fixed stop loss remains at a set price level, while trailing stop loss adjusts upward with favorable price movements.

Q2: How do I determine the best trailing distance?
A: Consider the asset's volatility - more volatile assets typically need larger trailing distances to avoid being stopped out by normal price fluctuations.

Q3: Can trailing stops guarantee profits?
A: No, they help manage risk but don't guarantee profits. Prices can gap through stop levels in volatile conditions.

Q4: Should I use percentage or fixed amount for trailing distance?
A: It depends on your strategy. Percentage works well for proportional moves, while fixed amounts work better for price-based strategies.

Q5: Do all brokers support trailing stop orders?
A: Most do, but some may have restrictions. Check with your broker for specific order types supported.