How does a trailing (sliding) stop loss work?
With a Trailing stop loss (sliding stop loss) you have the opportunity to follow a price development, positive or negative, when the price development is broken, an order is automatically sent to the market.
With Trailing Stop Loss, you do not specify a price in kroner and øre, which must activate your order. Instead, you choose what percentage increase or decrease should activate your order. Your order is activated when the highest or lowest price has been reached after the order time.
Orders activated by a Trailing Stop Loss have the same validity period with which the original order was placed.
Let’s say you bought a particular stock that you think will rise in price. However, you will sell the stock if it should suddenly fall by approx. 10%. To be on the safe side, you choose to accept a deviation of 2% in the price.
You buy the share for 200 DKK, and after a few days it rises to a price of 250 DKK
Something happens in the market and the stock starts to fall in price
As the stock falls 10% from its highest point, the system places a sell order on your behalf. The price is now DKK 225 (250 minus 10%)
Since you have chosen to accept a deviation of 2%, the sales order will be DKK 220.50 (225 minus 2%).
Note that if a stock opens at a price that deviates more than the selected price deviation, the opening price becomes the trigger price. In this example, the order is placed at the opening time of -2%.
The same is true after a trading stop.
If this price is not divisible by a trading interval, it is rounded to the nearest trading interval. How large a deviation is appropriate depends on how volatile the stock is. In addition, you must be aware that if there are buyers who want to buy at a higher price in the order depth, then the trade is carried out anyway for the order with the higher price.
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