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How to use stop loss/ trailing stop orders?

• Lets say i bought a stock at $20 and it's currently at $30 and i want to protect my gain and put a stop/loss or trailing stop at $28. Then lets say the stock moves up to $32. Do i have to move the trailing stop/stop loss order to $30 or does it move by itself and sells by itself whenever it reaches the stop loss. Also is stop loss orders and trailing stop the same thing?

• Answer:

  A Stop Loss Order is a set price that doesn't move. A Trailing Stop "trails" the price automatically as it moves. Use Investopedia to define your terms in finance: What Does Trailing Stop Mean? A stop-loss order set at a percentage level below the market price - for a long position. The trailing stop price is adjusted as the price fluctuates. The trailing stop order can be placed as a trailing stop limit order, or a trailing stop market order. Also known as a Trailing Stop Order. Investopedia explains Trailing Stop This is such a useful tool, yet many fail to use it. Using a trailing stop allows you to let profits run while cutting losses at the same time. Read more: http://www.investopedia.com/terms/t/trailingstop.asp#ixzz1fiUN4PkA What Does Stop-Loss Order Mean? An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a security position. Also known as a "stop order" or "stop-market order". Watch: Stop Loss Order Investopedia explains Stop-Loss Order Setting a stop-loss order for 10% below the price you paid for the stock will limit your loss to 10%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making. It's also a great idea to use a stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks for an extended period of time. Other types of Stop orders http://www.investopedia.com/search/default.aspx?q=stop+loss+order&submit=Search#axzz1fXzhdv68 Read more: http://www.investopedia.com/terms/s/stop-lossorder.asp#ixzz1fiUZoKIK Addendum: When price moves to $32, the trailing stop will move point-for-point with price. A standard stop loss order will remain at $28. A stop is executed immediately when that price is hit and generates a Market Sell Order. You could have half of you position set to sell at $28 with a stop, and trail the other half point-for-point, all on one position. If price takes a nosedive, half of you position will liquidate at $31, and the other half at $28.