A trailing stop is a dynamic order type used in trading that moves with the market price, allowing traders to protect profits while allowing for potential further gains. Instead of being set at a fixed price, a trailing stop adjusts automatically based on the price movement of an asset, typically set at a specified percentage or dollar amount away from the current market price. For example, if a trader sets a trailing stop 50 pips below the market price, and the price moves up by 100 pips, the trailing stop will also move up to lock in profits. If the market price then declines by the trailing stop amount, the position is closed, limiting losses and securing gains.