The trailing stop is used in forex to lock in the profits of an already profitable trade.

Let’s take an example, – you’ve bought EUR/USD at 1.3120 and by good analysis (for once), it’s risen 50 pips to 1.3170. You could take your profit here, but all the indicators and the news point to the bull market continuing…

The trailing stop is a stop-loss order at a given percentage below the current market price (in this case – if you were selling on a down trend, the stop would be placed above the present price). The fact that it’s operating on a percentage is the ‘trailing’ part of it – the actual price will vary with the market movement.

The trader then has a guarantee on the minimum profit in the position. Where you set the trailing stop, as always, depends on your attitude to risk, and indeed your attitude to risk managment… Not all accounts/platforms/brokers give you the option, and you should certainly consider getting yourself to a broker that will handle some of the fancier forex orders efficiently – but sometimes these things have to be accomplished by sitting in front of screen and making your own decisions.