Search
LearnBlogCareersHelpLog InSign Up
Menu
Getting Started
Trailing Stop Order

Trailing Stop Order

A trailing stop order lets you track the best price of a stock before triggering a market order. Investors often use trailing stop orders to help limit their maximum possible loss.

With a trailing stop order, the trailing stop price follows, or “trails,” the best 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. The market order will be 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. Also, not all stocks support market orders during extended hours. If the market is closed, the order will be queued for market open. Learn more by checking out Extended-Hours Trading.

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. Then, the stock will be purchased at the best price 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 than the new lowest price.
  • If MEOW rises to the stop price ($105.50) or higher, it triggers a buy market order. MEOW will be purchased at the best price currently available.

These examples are shown 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.

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 ($95) or lower, it triggers a sell market order. MEOW will be sold at the best price currently available.

These examples are shown 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.

Reference No. 20190822-930961-2814801
Still have questions? Contact Robinhood Support
Can't find what you're looking for?Contact Robinhood Support
Robinhood Financial LLC and Robinhood Crypto, LLC are wholly-owned subsidiaries of Robinhood Markets, Inc.
Securities trading is offered to self-directed customers by Robinhood Financial. Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA).
Robinhood Financial LLC is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.
Cash Management is an added feature to your Robinhood Financial LLC brokerage account. The Annual Percentage Yield (APY) paid by program banks might change at any time at the program banks' discretion. Interest is earned on uninvested cash swept from the brokerage account to the program banks. Neither Robinhood Financial LLC nor any of its affiliates are banks. The debit card is issued by Sutton Bank, member FDIC, pursuant to a license from Mastercard® International Incorporated.
Cryptocurrency trading is offered through an account with Robinhood Crypto. Robinhood Crypto is not a member of FINRA or SIPC. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC.
Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities via mobile devices or Web. Relevant SEC & FINRA fees may apply. Please see the Fee Schedule.
Robinhood Financial is currently registered in the following jurisdictions. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Robinhood Financial is not registered. Additional information about your broker can be found by clicking here.
Margin trading involves interest charges and risks, including the potential to lose more than any amounts deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.
Investors should consider the investment objectives and unique risk profile of Exchange Traded Funds (ETFs) carefully before investing. ETFs are subject to risks similar to those of other diversified portfolios. Leveraged and Inverse ETFs may not be suitable for all investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies.
Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. A prospectus contains this and other information about the ETF and should be read carefully before investing. Customers should obtain prospectuses from issuers and/or their third party agents who distribute and make prospectuses available for review. ETFs are required to distribute portfolio gains to shareholders at year end. These gains may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading will also generate tax consequences. Additional regulatory guidance on Exchange Traded Products can be found by clicking here.
Options transactions may involve a high degree of risk. To learn more about the risks associated with options trading, please review the options disclosure document entitled Characteristics and Risks of Standardized Options, available here or through https://www.theocc.com/about/publications/character-risks.jsp.
Third party information provided for product features, communications, and communications emanating from social media communities, market prices, data and other information available through Robinhood Markets, Inc. or any of its subsidiaries or affiliates are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any financial instrument or cryptocurrency or as an official confirmation of any transaction. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Any information about Robinhood Crypto on any Robinhood website (including www.robinhood.com and blog.robinhood.com), the Robinhood platform, e-mails, or any other communications, are meant for informational purposes only and are not intended as an offer, solicitation, or advertisement for Robinhood Crypto or any goods or services offered by Robinhood Crypto. The Robinhood website provides its users links to social media sites and email. The linked social media and email messages are pre-populated. However, these messages can be deleted or edited by users, who are under no obligation to send any pre-populated messages. Any comments or statements made herein do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates.
Investors should be aware that system response, execution price, speed, liquidity, market data, and account access times are affected by many factors, including market volatility, size and type of order, market conditions, system performance, and other factors.
All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.
Trading in cryptocurrencies comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Several federal agencies have also published advisory documents surrounding the risks of virtual currency. For more information see the Robinhood Crypto Risk Disclosure, the CFPB's Consumer Advisory, the CFTC’s Customer Advisory, the SEC’s Investor Alert, and FINRA’s Investor Alert.
Check the background of Robinhood Financial LLC and Robinhood Securities, LLC on FINRA’s BrokerCheck.
Robinhood Terms & ConditionsDisclosure LibraryContact UsFAQ
© 2019 Robinhood. All rights reserved.
20191014-981843-2955118