trailing stop
Trailing Stop is a sell order that follows your share price up as it rises, but locks in place once the price starts falling, protecting your gains.
In plain English
Uncle Femi keeps a wristwatch on when he goes to buy tomatoes at Mile 12, and he has a rule he taught his daughter, if the price of a basket climbs above a certain point during the morning rush, he will not chase it any higher, but if a seller starts dropping the price back down past where he already agreed to buy, he walks away immediately, no arguing.
A trailing stop works on that same instinct, except it is written into your stockbroker's system so you do not need to stand there watching all day.
You set it as a distance below the current price, say five percent, and as your share climbs, that stop line climbs with it, always sitting five percent behind. The moment the price stops climbing and falls by that same five percent from its highest point, the order fires and sells your shares automatically.
Say you bought MTN Nigeria shares at ₦220 and they rise to ₦300. With a trailing stop set at ten percent, your sell trigger keeps moving up too, sitting at ₦270 once the share hits ₦300. If MTN then drops to ₦270, you are sold out with a tidy profit locked in, even though you were not watching your phone that afternoon.
A Nigerian in Manchester holding Lloyds Bank shares on a UK trading app can set the same kind of order before going to work, so a sudden afternoon dip does not wipe out weeks of gains while she is busy with patients on her ward.
The comfort of a trailing stop is that it protects you from your own hesitation, that voice that says just a little longer, maybe it goes higher, while the price calmly slides away from you.
You buy Dangote Cement at ₦350 per share and set a trailing stop at eight percent. The price rises to ₦420, so your stop rises too, sitting at ₦386.40. The price then falls to ₦386, the order sells automatically, and you walk away with a profit of about ₦36 per share instead of watching it slide all the way back to ₦350.
Questions people ask
Does a trailing stop guarantee I sell at the exact stop price?
Not always. It guarantees the order is triggered at that price, but the actual sale can happen slightly below it if the share is falling fast and there are not enough buyers at that exact level. This is called slippage, and it matters more with shares that do not trade often.
Can I use a trailing stop on the Nigerian Exchange?
Some Nigerian brokers offer it, but not all, so check with your broker's trading platform first. Where it is not available directly, you can still track the price yourself and place a manual sell order once it drops by your chosen percentage.
What is the difference between a trailing stop and a normal stop loss?
A normal stop loss stays fixed at one price no matter what the share does. A trailing stop moves upward as the price rises, so it keeps adjusting to protect more profit, rather than sitting still at the level you first chose.
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