A trailing stop order is a type of trade order that allows investors to protect profits while still giving their investments room to grow. Instead of setting a fixed price at which to sell, a trailing stop adjusts dynamically as the asset’s price moves in a favorable direction.When you place a trailing stop order, you specify a percentage or dollar amount away from the current market price. If the price rises, the trailing stop price moves up accordingly, maintaining the set distance. However, if the price drops, the trailing stop does not adjust downward. When the asset’s price falls to the trailing stop level, the order becomes a market order and is executed at the next available price.This method is especially useful in highly volatile markets, allowing traders to lock in profits while still being able to capitalize on upward price movements. It helps minimize losses without the need for constant monitoring of the market. Overall, a trailing stop order is a strategic tool for managing risk in trading.