A trailing stop-loss order is a particular type of stop-loss order. It is almost similar to the basic stop-loss order; however, the significant difference with it is that it goes after a certain price as this price is moving in a favorable direction, unlike a stop-loss order that remains at a specific price.
As a trailing stop-loss moves in a certain direction, it helps to spot where you can make a profit and therefore acts accordingly.
It cages a profit while keeping the trade open until the trailing stop level is reached.
The trailing stop-loss order is set at a specific distance from the original point so that when the stop-loss level is reached, a stop-loss order is activated, and the market position is closed.
A trailing stop-loss follows a favorable direction. If this direction changes and the market starts moving in an unfavorable direction, the trailing stop loss will reverse.
In a trailing stop-loss, once you reach the stop-loss price, your trade will close; hence, you avoid making a loss.
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