You buy 1000 shares for $90 each. It rises to $100 a piece. Now you don't want to sell a winner. it might go up to $1000 a piece and you will flog yourselves. You also don't want to sit and watch the share fall back to $85 while you beat your head against the wall thinking "sh*t i should have just sold it...i am a stupid greedy ____".

So you use a "Trailing Stop". When the share hits $100, you put in a trailing stop at 2 points (=$2 -> this can be anything you decide). Now your stop price becomes $98. If the share falls the $98, it will be sold as a market order. BUT, it is goes to $200, your stop moves up with it and becomes $198 and your shares will be sold if the price falls below $198.

To summarize, when you put in a 'Trailing Stop', the "stop" price moves up when the price of the share moves in your favor and stays still when the price of the share moves against you. And once the "stop" price is hit, the share is sold.

Hereby, you allow chances for further gains and also eliminate the risk of losing whatever you gained.

¶ 11:55 AM