Trailing Stop
Trailing Stop Explained
Trailing Stop orders offer the advantage of providing
protection against losses with an automatically
executed order. Additionally, they may help the trader
protect profits by raising the Stop price as the stock
price increases.
Trailing Stop
Trailing Stop Orders are designed to help you
manage your investments by allowing you to enter a
stop order with a trigger price that changes with the
market.
What is a Trailing
Stop Order?
Trailing Stop Explained
A Trailing Stop order is a Stop Loss order whose
Stop price trails the stock price as it rises. It will
automatically adjust the Stop price higher,
trailing the stock price by either a fixed dollar
amount or a fixed percentage.
Trailing Stops are used in exactly the same
instances as a Stop Loss order. The Trailing Stop
provides the additional benefit of helping to
increase profits while simultaneously protecting
against losses. Some traders choose not to use
the Trailing Stop to avoid selling too early if a
stock price is rising but with high volatility.
Trailing Stop
Buy vs. Sell
Stop (Sell)
Orders that become booked market orders
when a board lot is traded at or below the
trigger price on the marketplace to which the
order has been booked.
Stop (Buy)
Orders that become booked market orders
when a board lot is traded at or above the
trigger price on the marketplace to which the
order has been booked.
A Trailing Stop may be used for
both a buy or sell order. For a
Trailing Stop sell order, the stop
price would trail the stock price
up and for a buy order; the stop
price would trail the stock price
down.
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Trailing Stop | Scotia iTRADE
EXAMPLE
An investor purchased XYZ stock at $12 and determined that he is comfortable
with the possibility of losing $2 per share. To minimize his losses, he fills out a
trading order ticket to sell 100 shares of XYZ with the price type set to ‘Trailing
Stop $’ and a $ Value at $2. The Calculated Price is automatically generated at $10
($12 stock price -$2 trailing stop price). As he monitors the stock prices, he
notices that it rises to $15. The Trailing Stop price is now automatically adjusted
to $13 ($15 stock price - $2 trailing stop price). After several days, the stock price
begins to dip. The Trailing Stop price will stay at $13 as it only trails the stock price
upwards in a sell order. When the stock price hits $13, the order is activated
because it meets the Trailing Stop price which then becomes a market order.
Remember that the shares are not necessarily sold at $13 because that is the
point at which the order is only activated. The shares will be sold at market price
(the best price currently available in the market).
16.00
Stock Price rises to $15.00
14.00
New Stop Price: $13.00
12.00
Stock Price: $12.00
Stop Price: $10.00
*The above example is for educational purposes only and not to be interpreted as a recommendation.
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Trailing Stop | Scotia iTRADE
How To Set A Trailing Stop Order
To set a Trailing Stop order on Scotia OnLine®, begin by selecting your account. Fill
in the trade ticket with the symbol, market, order type (sell), and quantity.
Select price type and select ‘Trailing Stop $’ for a fixed dollar amount (or ‘Trailing
Stop %’ for a fixed percentage) from the drop-down, then set the ‘$ Value’ (‘%
Value’ if using ‘Trailing %’). The Calculated Price is automatically generated based
on the number you entered. Select a day sometime in the next 30 days to keep
your order open for a while.
Come back on a regular basis to adjust the ‘$ Value’ (or ‘% Value’) as the stock
price moves up or down.
 Select Price Type: Trailing Stop $
 Set $ Value
 Calculated Price will be generated automatically
 The Trailing Stop price (Calculated Price) will trail
the stock price up (for sell orders)
 If stock hits Trailing Stop Trigger Price (Calculated
Price) > order is activated; turns into a Market
Order
 Security will be sold at the best price currently
available in the market
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Trailing Stop | Scotia iTRADE
Mailing address
Investor Information Centre
Scotia iTRADE
PO Box 4002 Station A
Toronto, ON
M5W 0G4
48 Yonge Street (Yonge/Wellington)
Toronto, ON, M5E 1G6
Tel: 1-888-769-3723
Email: [email protected]
Scotia iTRADE® (Order-Execution Only Accounts) is a division of Scotia Capital Inc. ("SCI"). SCI is a member of the Investment
Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. Scotia iTRADE does not provide
investment advice or recommendations and investors are responsible for their own investment decisions. ®Registered trademark of
The Bank of Nova Scotia. Used under license.
© Scotia iTRADE 2014. All Rights Reserved.