A stop-loss order that automatically moves in the direction of profit as the price moves favourably, locking in gains while protecting against reversals.
A trailing stop loss is a dynamic version of the standard Stop Loss that automatically adjusts upward (for long positions) as the stock price rises, maintaining a fixed distance or percentage below the highest price achieved. Unlike a static stop-loss that stays at one price, the trailing stop "trails" the price upward but never moves down — it only ratchets in the direction of profit.
For example, you buy a stock at INR 1,000 and set a trailing stop loss of INR 50. Your initial stop is at INR 950. If the stock rises to INR 1,100, the stop automatically moves to INR 1,050. If it then rises to INR 1,200, the stop moves to INR 1,150. If the stock reverses and falls to INR 1,150, the stop triggers and you exit with a profit of INR 150 per share — you captured the bulk of the move while being protected from giving it all back.
Trailing stops solve one of the hardest problems in trading: when to exit a winning trade. Without a trailing stop, traders either exit too early (fear of losing profits) or too late (greed, hoping for more). The trailing stop automates the exit decision, letting profits run while ensuring you keep a meaningful portion of the gains.
Not all Indian brokers support automated trailing stops natively. Zerodha Kite offers a GTT (Good Till Triggered) order that can function as a trailing stop with manual updates. Some brokers provide bracket orders with trailing stop functionality for intraday trades. Many traders implement trailing stops manually — checking the stock price and adjusting their stop-loss order upward each day. Third-party tools and alert services can also assist.
Trailing stop distance should be calibrated to the stock's Volatility. A tight trailing stop (2% below the peak) on a volatile stock like Adani Enterprises will get triggered by normal price swings. A wider stop (8-10%) allows the trade to breathe but gives back more profit if reversed. Many traders use a multiple of ATR (Average True Range) — for example, 2x ATR — as their trailing distance, adapting automatically to each stock's volatility profile.
India Context
Not all Indian brokers support native trailing stops. Zerodha offers GTT orders as a substitute. Bracket orders provide trailing functionality for intraday. Many traders trail manually.