Three practice trailing stop: Trailing Stop Definition and Uses

Sept. 6, 2020

Introduction

I work on practice on stock investment after March 27, 2020. I have to practice how to set trailing stop, so that I can avoid big loss of one trade over $500 US dollars. I did purchase 200 shares of INTC stock on Sept. 3, and then in less than three day there is $500 dollars loss. I need to be a quick learner, one of ideas is to practice setting trailing stop. If I do not practice first, then I will not think about using it when market corrections come. 

Learn 20 minutes first

Here is the article. 

Plan to work on trailing stop practice on Sept. 8, 2020. 

Understanding the Trailing Stop

Trailing stops only move in one direction because they are designed to lock in profit or limit losses. If a 10% trailing stop loss is added to a long position, a sell trade will be issued if the price drops 10% from its peak price after purchase. The trailing stop only moves up once a new peak has been established. Once the trailing stop has moved up, it cannot move back down.

Trailing stops can also be used for short positions by establishing a trigger price above the current market price. 

Actionable items

I purchased 200 shares of INTC stock at price of $52.50, and also I like to set up 1% trailing stop, so that shared will be sold if the price drops 0.52 dollars, $49.75/ share. If the stock goes up 3%, then the price goes up $1.56, $54.06, 1% will be 0.54 dollars, so the stock goes down 0.54 dollars, the sell will be triggered.