A sell trailing stop order sets the stop price at a fixed amount below the market price with an attached "trailing" amount. 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 technique 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 used in falling markets.

Trailing stops are available for all Smart-routed stocks and options, and on all futures exchanges which currently support traditional stop orders.

In addition, IB offers auto trailing stop orders, which allow you to attach a trailing stop order to a limit order. The trailing stop will activate when the limit order is executed.

IB does not recommend using trailing stop orders, as there is no guarantee that your order will be filled at or near the designated stop price, which is especially dangerous in a rapidly falling market. In addition, trailing stop orders will accentuate volatility in rough markets.

You have purchased 100 shares of XYZ for $50.00/share and want to lock in a profit and limit your loss. You set a trailing stop order with the trail amount 1 point below the current market price. The price of XYZ starts rising and hits $52.00 over the course of the month. The trailing stop price has adjusted accordingly and is at $51.00. Suddenly the price begins to drop. Once it hits $51.00 the trailing stop order is activated, and a market order to sell 100 shares of XYZ is submitted.

NOTES

• Financial Advisors can submit Trailing Stop order types only for a single account destination.