top orders are orders that become
market
orders when the market price of a
security reaches or exceeds a given set price. A
trailing Stop order is one that is adjusted by the
investor periodically to compensate for changes in
price of the security. A new stop order is issued
and the old one cancelled when creating a trailing
stop. The premise behind a trailing stop is to limit
your losses. As long as losses are small, an
investor is able to live to fight another day so it
is better to stop out a losing trade than to risk a
larger percentage of capital when the market moves
in a way you did not expect. The other side of this
premise is to let your profits run. A trailing
stop, that is incrementally changed to follow the
current
trading price, allows profits to
continue and should be far enough away from the
current price level to compensate for intra-day
volatility as price moves in a larger trend.
