Once a regular stop loss is placed at a specific price level, it generally stays in place unless manually modified by the user. A trailing stop moves along the favourable direction by the preset distance. As the price extends floating profits, the stop level will be adjusted accordingly. When the market reverses, the stop that has moved up or down will not revert to its original position.

Therefore, trailing stops are more suitable for scenarios where there is already some floating profit and you wish to keep room for further market movement.

Lucky Gold’s trading rules specify minimum price distance requirements for pending orders, take-profit, stop loss and trailing stop. Such requirements must be met under normal circumstances.

How a Regular Stop Loss Works

Assume you open a long London Gold position at $4300 with a stop loss set at $4290. Unless you manually adjust it, the $4290 level remains unchanged. If gold later rises to $4320, the stop loss stays at $4290. If you want to raise the stop loss to $4305, you need to modify it manually.

The advantage of a regular stop loss is straightforward: the level is clear. Once your trading plan is finalised, no repeated adjustments are required for every market swing.

How a Trailing Stop Works

A trailing stop operates based on a preset "distance". You set a trailing distance. When the market moves in your favour, the stop loss follows at that set interval.

MetaTrader 5’s official description of Trailing Stop follows the same logic: once the floating profit of a position reaches the preset distance, the system moves the stop loss. If the market continues moving favourably, the stop keeps trailing. When the market reverses, the stop remains at its new level.

The purpose is simple: If the trend continues, you retain room for gains. If the market suddenly reverses, the adjusted stop helps limit profit retracement.

Simple Example

Suppose you buy gold at $4300. The price later climbs to $4320. A regular stop loss remains at $4290. With a trailing stop, once the stop has trailed up to roughly $4310, your exit level is raised when the price pulls back from $4320.

This is only an illustrative example. In live trading, your trailing distance should be set according to gold’s volatility and your trading terminal rules. A distance that is too tight may trigger the stop loss from ordinary intraday fluctuations. If set too wide, a large portion of accumulated profit may be given back.

Will the Trailing Stop Move Backwards Along With Price Pullbacks?

Generally, it will not. It only adjusts in the direction favourable to your position. For long positions, the stop may move higher as the price rises. When the price falls, the trailing stop will not widen downwards to follow the decline. The logic works in reverse for short positions.

This mechanism explains the meaning of the term "trailing".

An Easily Overlooked Detail When Using MT5

If you use trailing stop via MT5, MetaTrader officially states that Trailing Stop is executed locally on your trading terminal, which differs from server-side regular Stop Loss.

Once the terminal is closed, the trailing function will no longer update automatically. However, the last stop-loss price saved on the server will still remain effective.

This detail is often overlooked by new traders. If you use other trading terminals, the exact execution logic shall follow the corresponding software specifications.

Is a Trailing Stop Always Better Than a Regular Stop Loss?

The two tools fit different trading plans. If you clearly define your maximum acceptable loss before opening a position, a regular stop loss is more direct. When your position already holds floating profit and you want to let profits run, a trailing stop can be considered.

The trailing distance is what truly determines performance. During periods of fast gold volatility, a mechanically tight trailing distance can easily trigger exit due to temporary price pullbacks. The tool itself cannot analyse market conditions on your behalf.

Risk Warning: Stop loss and trailing stop help manage risks. Nevertheless, during price gaps, rapid volatility or low liquidity, the actual execution price may differ from your preset price level.