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.

This example is shown for illustrative purposes only. Note that in some cases, only a portion of your order may execute if shares aren't available at certain prices. Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s 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 ($104.50) or lower, it triggers a sell market order. MEOW will be sold at the best price currently available.

This example is shown for illustrative purposes only. Note that in some cases only a portion or none of your order may execute if shares aren’t available at certain prices. Understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s best to choose an order type based on your investment goals and objectives.

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.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

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 and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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