Trailing stop order | Robinhood

Trailing stop order

A trailing stop order lets you track the price of a stock before triggering a market order if the stock reaches the trailing stop price. Investors often use trailing stop orders to help limit their maximum possible loss or as part of an exit strategy.

With a trailing stop order, the trailing stop price follows or trails the price of the stock by a trail that you specify. If the stock’s price moves in a favorable direction, the trailing stop price will move with the stock. If the stock’s price moves in an unfavorable direction, the trailing stop price will stay the same.

If the stock’s price reaches the trailing stop price, a market order is triggered and is executed at the best price currently available. Keep in mind, short-term fluctuations in a stock’s price can trigger a trailing stop order. Also, you aren’t guaranteed a price with a trailing stop order.

Buy trailing stop order

With a buy trailing stop order, the stop price follows, or trails, the lowest price of a stock by a trail that you set. If the stock rises above its lowest price by the trail or more, it triggers a buy market order and is executed at the best price currently available.

Example

You want to buy MEOW, but you think it will fall in value and want to wait to purchase it. You also think that if MEOW goes up by a defined amount (let’s say 5%) it may go even higher. In an attempt to help minimize potential costs, you set your trail to 5%. Your stop price will always remain 5% above MEOW’s lowest price.

MEOW is currently trading at $110 per share. Your stop price will start at $115.50, which is 5% higher than the current price of MEOW.

  • If MEOW stays between $110 and $115.50, the stop price will stay at $115.50.
  • If MEOW falls to $100, the stop price will update to $105, 5% above the new lowest price.
  • If MEOW rises to the stop price ($105) or higher, it triggers a buy market order. MEOW will be purchased at the best price currently available.
Sell trailing stop order

With a sell trailing stop order, the stop price follows or trails the highest price of a stock by a trail that you set. If the stock falls below its highest price by the trail or more, your sell trailing stop order becomes a sell market order and the stock will be sold at the best price currently available.

Example

You own MEOW. You think MEOW will rise in value, but want to help protect yourself in case it falls in value. If you set your trail to 5%, your stop price will always remain 5% below MEOW’s highest price.

MEOW is currently trading at $100 per share. Your stop price will start at $95, which is 5% lower than the current price.

  • If MEOW stays between $100 and $95, the stop price will stay at $95.
  • If MEOW rises to $110, the stop price will update to $104.50, 5% below the new highest price.

If MEOW falls to the stop price ($104.50) or lower, it triggers a sell market order. MEOW will be sold at the best price currently available.

Over-reserving buying power

To protect your account against overspending, we’ll over-reserve your buying power for stop buy orders and trailing stop buy orders.

  • For Good-For-Day orders that you enter during market hours, we’ll reserve an additional 5% of buying power.
  • For other orders, we’ll reserve an additional 10% of buying power.

Keep in mind, these percentages might change in response to extreme volatility.

Disclosures

The examples included in this article are for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s usually best to choose an order type based on your investment goals and objectives.

All investments involve risks, including the loss of principal. Investors should consider their investment objectives and risks carefully before investing.

Robinhood U.K. Ltd (Robinhood UK) is a company registered in England and Wales (09908051) and is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

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All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

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All investing involves risk and a loss of principal is possible.

Robinhood U.K. Ltd (Robinhood UK) is authorised and regulated by the Financial Conduct Authority (FRN: 823590). Robinhood UK onboards UK customers and has the lead customer relationship with UK customers in relation to their use of the Robinhood UK app and website. Robinhood UK introduces UK customers to Robinhood Securities, LLC for order routing, execution, clearing, settlement, arranging custody services and margin lending to eligible UK customers with margin accounts. Robinhood Securities, LLC is regulated in the U.S. by the SEC and FINRA. Robinhood UK and Robinhood Securities, LLC are subsidiaries of Robinhood Markets, Inc.

Robinhood U.K. Ltd is a private limited company registered in England and Wales (09908051).

Robinhood does not provide investment advice. Individual investors should make their own decisions.

Commission-free trading of stocks refers to $0 commissions for Robinhood self-directed individual brokerage accounts that trade U.S. listed securities and ADRs. Keep in mind, other costs such as regulatory fees may apply to your brokerage account. Please see Robinhood UK’s Fee Schedule to learn more.

UK Privacy policy

© 2024 Robinhood. All rights reserved.