| Updated: October 23, 2025Trailing stops in Forex
You will learn about the following concepts
- What do we mean by “trailing stops”?
- How to use them?
- And more…
Once a protective stop is in place, the price action will either trigger that stop or the trade will begin to register gains. After a certain amount of profit has been accumulated, the trader will need to maximise this profit without giving up too much of what has been gained. In such a case, the trader will use a trailing stop to lock in their gains.
What are they?
Trailing stops are stop-loss orders that follow the course of the trade and move in favour of a trader’s long or short position. They are more flexible than fixed stop-losses because they track the currency pair’s price direction and do not need to be reset manually.
- Trade Forex
- Trade Crypto
- Trade Stocks
- Regulation: NFA
- Leverage: Day Margin
- Min Deposit: $100
How are they used?
A trailing stop can be set at a defined percentage away from a currency pair’s current market value. If an investor enters a long position, the trailing stop should be placed below the pair’s current market value. If an investor takes a short position, the trailing stop should be placed above the current market value. This stop is usually employed to secure existing profits by allowing the trade to remain open and continue to accrue gains as long as the currency pair moves in the desired direction. If the pair suddenly reverses and moves against the position by the specified percentage, the trade will be closed, limiting losses.
Let us look at an example. A trader decides to go long USD/JPY with 5,000 units at 104.00 and sets a 2% trailing stop order (a Good ‘Til Cancelled order) to protect their position. If USD/JPY falls by 2% or more, the trailing stop will be triggered, limiting losses. Over the next month, the pair rises to 105.50, a gain of 1.44%. The trader is pleased with the profit but worries that the pair may retrace. Because the trailing stop is still in place, if the currency pair declines by 2% or more within the next week, the stop will be triggered. The trader may decide to tighten the trailing stop to 1.50%, giving the position more room to run.
Over the next few trading sessions, USD/JPY appreciates further, reaching 106.00, but then suddenly tumbles 1.50% within a single trading day to 104.40. This 1.50% decrease would trigger the trailing stop and, assuming the order was executed at 104.40, the trader would lock in 40 pips of profit.
Bear in mind that if the pair had fallen by, say, 0.55% that same day, the trailing stop would not have been triggered because it was set at 1.50%. Therefore, it is important to set the trailing-stop percentage at a level that is neither too tight nor too wide. If the stop is placed too close to the current market price, the trade may be closed before it has a chance to develop. Conversely, if the stop is placed too far from the market price, the trader could leave too much money on the table when it is triggered.
It is also possible to adjust trailing stops manually with the help of technical indicators such as moving averages, channels or trend lines.
If a trader has entered a long position and the currency pair finds support at the moving average, they could move the stop-loss below the moving average as the trade develops. However, it is a matter of personal preference when and how to do so. The trader may choose to move the stop-loss in a series of stages, or they may decide to adjust it each time a new candle begins to form.
Here we can see how to move the trailing stop in stages below the moving average as the value of EUR/USD surges.