A trailing stop is a stop order; it refers to an order designed to allow traders to specify a maximum amount of loss without specifying a limit to the possible gain from a trade.
On a Buy position, traders use a trailing stop to set a stop at a fixed amount below the market. If the market rises, the trailing stop will rise by an equal amount. If the market begins to fall, the stop will stay at a fixed rate until the order is triggered.
A similar order can be set on a Sell position where the stop falls as the market falls. The order will be triggered once the market rises to the last updated stop price.
For a graphic explanation, please refer to the video tutorials on our website 'Beginners Lessons' course > 'Types Of Orders'.