Trailing Stop

A trailing stop is a stop order that automatically follows the price as it moves in your favor, staying a fixed distance or percentage behind, and triggers if the price reverses by that amount. It lets a winning position keep running while ratcheting up the level at which you would exit.

For example, you buy BTC at $60,000 with a 5% trailing stop, so the stop starts near $57,000. If BTC rises to $70,000, the stop trails up to $66,500. If the price then falls 5% from its peak, the position closes around $66,500, locking in most of the gain. Crucially, the stop only moves up (for a long position), never back down.

Trailing stops are popular for trend-following, where the goal is to stay in a move until it clearly ends rather than picking a target in advance. The main pitfall is choosing the trail distance: too tight and normal volatility knocks you out of a healthy trend early; too wide and you give back a large share of profits before the stop triggers. In choppy crypto markets, tight trailing stops are triggered frequently, so the distance should reflect the asset's typical swings.