A Sell Trailing Stop Order sets the stop price at a fixed amount below the market price with an attached "trailing amount" or "trailing ratio". As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price doesn't change, and a market order is submitted when the stop price is hit. This order is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain.
"Buy" trailing stop orders are the mirror image of sell trailing stop orders, and are most appropriate for use in falling markets.
Let's assume that you purchase 100 shares of XYZ Company at 100 each. You put in a trailing stop order for 5%. If the shares drop 5% below market price, you would automatically sell the shares.
Although you have every expectation that XYZ Company's stock will rise, if it does move against you, you’ll have limited your financial losses to 5% of the total investment. This protects you and locks in profit. If, however, the stock price rises, you will benefit from the gains.
Let's say that XYZ Company’s stock jumps in a month to 200 per share. This order will only trigger if the price dips below 5% of 200 (190).
A Trailing stop order is an instruction to buy or sell at the market price once your stop price is reached. Please note that a Trailing stop order is not guaranteed a specific execution price and may execute significantly away from its stop trigger price, especially in volatile and/or illiquid markets.
Trailing stop orders may be triggered by a sharp move in price that might be temporary. If your Trailing stop order is triggered under these circumstances, you may buy or sell at an undesirable price. Sell Trailing stop orders may make price declines worse during times of extreme volatility. If triggered during a sharp price decline, a Sell Trailing stop order also is more likely to result in an execution well below the stop price.
Futu simulates advanced order types on its books and routes the order to the destination when it reaches the trigger price. Futu simulates Trailing stop orders with the following default triggers:
● Sell Simulated Trailing stop orders become market orders when the last traded price is less than or equal to the stop trigger price(Calculated as the highest Market Price after placing the order - Trailing Amount).
○ If you set Trailing Ratio instead of Trailing Amount, you can calculate Trailing Amount = the highest Market Price after placing the order * Trailing Ratio
● Buy Simulated Trailing stop orders become market orders when the last traded price is greater than or equal to the stop trigger price(Calculated as the lowest Market Price after placing the order + Trailing Amount).
○ If you set Trailing Ratio instead of Trailing Amount, you can calculate Trailing Amount = the lowest Market Price after placing the order * Trailing Ratio
Unless you select specific trading hours, advanced orders will only be triggered during regular trading hours or continuous trading session.
You can only place a trailing stop order to close positions, selling short or buying to open new positions is not allowed.