A trailing stop is a stop order. This refers to an order designed to allow traders to specify a maximum amount of loss without specifying a limit to the possible gain from a trade.
On a Buy position, traders use a trailing stop to set a stop at a fixed amount below the market. If the market rises, then the trailing stop will rise by an equal amount. If the market then begins to fall, the stop will stay at a fixed rate until the order is triggered.
A similar order can be set on a Sell position where the stop falls as the market falls. The order will be triggered once the market rises to the last updated stop price.
For a graphic explanation please refer to the video tutorials on our website "Beginners Lessons" course > "Types Of Orders":