A trailing stop is an order aimed to control stop orders or a number of pips by which a broker will move your stop loss order following a market trend.
When you turn off your computer, a trailing stop order, unlike stop loss orders, is not executed anymore. When a trading platform is switched off, only a stop loss order set by the trailing stop can be active. A trailing stop order is frequently used on the forex market as well as on other exchanges and OTC financial markets.
After placing a trailing stop order, for example, within the number of X points, we observe the following picture:
1. The MetaTrader platform does not do any action until an open position moves by X points. Now MetaTrader can set a stop loss order at a distance of X points from a current price.
2. Once a price is at a certain distance from a set stop order which is higher than the trailing stop value, MetaTrader sends an instruction to the server to change the level of this stop order that it will be at the trailing stop interval from a current price.
Thus, a trailing stop order insures a trader against the situation when a price turns against them. The trailing stop monitors prices by moving a stop loss order along with their movement. If a price goes against a trader's position, the trailing stop will close it with a profit.
However, remember that the trailing stop can be profitable only if you follow two basic rules:
1. A stop loss order is a maximum you are ready to lose in a single test of your strategy.
2. The stop loss should be placed only where you think there is the beginning of a steady counter-trend unprofitable for you.