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Trailing Stop is a special type of stop loss order that follows the price if it moves in the trade's favour. Trailing stops are usually managed automatically either through the trading platform or via a custom program. A typical trailing stop is when the stop loss retains a maximum distance of certain number of pips with the current price. For example if Trailing Stop is 10 pips then the maximum distance between Stop Loss and the current price would be 10 pips. If the price reverses and the distance drops below 10 pips Stop Loss remains where it was but if the distance becomes more than 10 pips Stop Loss moves in the price direction to maintain the maximum 10 pips distance.

A trader may use more complex methods such as Parabolic SAR or Volatility based techniques to define trailing stop settings.

Relevant article: Parabolic SAR Trailing Stop

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