Advanced Techniques in Day Trading: A Practical Guide to High Probability Day Trading Strategies and Methods

Trailing Stop

A Trailing Stop order acts as a moving stop loss to protect profits, while also maximizing gains should the price continue going upward. It allows you to set a stop price at a fixed amount below the market price, called a trailing amount. If the market price rises, the stop price follows behind it. However, if the stock price falls, the stop loss price does not change. Think of it as a one-way stairway — the stop price can only take steps up. Once the stop price is hit, the order becomes a market order.

For example, I am long 100 shares of FB and the price is at $165. I place a $2 Trailing Stop order. This sets the initial stop price at $163. The price then moves up to $167. The new stop price is now $165. If the price moves down to $166, the stop price remains at $165. If FB falls to $165, a market sell order will be sent to exit the position. On the other hand, if FB continues climbing to $175, my $2 trailing amount will be right behind it the entire way up. In other words, I am specifying a maximum loss of $2, but no maximum gain. To enter a Trailing Stop order:

1. Select STOP from the route dropdown
2. Select Trailing from the Stop Type dropdown
3. Enter 2 in Trailer Price
4. Press SELL

See Figure 2.15 below for a screenshot of these steps in the appropriate window in Montage.

Figure 2.15 – Example of how to enter a Trailing Stop order in Montage.

You can also use Hotkeys to send a Trailing Stop order. Here is an example for sending a Trailing Stop order with a trailing amount of $0.50:

Share=Pos;ROUTE=STOP;StopType=Trailing;TrailPrice=0.50;TIF=DAY+;SELL=Send;