#StopLossStrategies

Protecting profits and limiting losses are everyday concerns for investors. While the market offers the potential for significant gains, it also carries inherent risks that can fast erode your returns. Hence, there is a need for many traders to combine trailing stops and stop losses. This pairing offers an accessible way to protect your investments against sudden market downturns while allowing them room to grow into larger profits for you.

Table of Contents

Trading Strategies

Beginners

Trailing Stop/Stop-Loss Combo Leads to Winning Trades

Managing Your Risk While Giving Your Gains Room To Grow

By 

Peter Gratton

Updated November 20, 2024

Reviewed by 

Somer Anderson

Fact checked by 

Timothy Li



Michael M. Santiago / Staff / Getty Images

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Protecting profits and limiting losses are everyday concerns for investors. While the market offers the potential for significant gains, it also carries inherent risks that can fast erode your returns. Hence, there is a need for many traders to combine trailing stops and stop losses. This pairing offers an accessible way to protect your investments against sudden market downturns while allowing them room to grow into larger profits for you.

A stop-loss order is your safety net, automatically selling a position if the stock price drops to a preset level. Stop losses, though, will otherwise simply stay at the price you set. This is where the trailing stop shines since it moves in tandem with rising stock prices, effectively locking in gains by adjusting your exit point.

Together, these tools address some of the risks of market volatility. Below, we detail how and when to use them, while giving you a heads-up about their potential pitfalls.