You could use this when you already own a stock and want to protect your profits without watching the market all day.
Your stop price follows the stock price upward as it rises. If the stock drops by your trail amount from its highest point, the stop is triggered.
Example:
You own TSLA, currently trading at $200. You set a sell trailing stop with a $10 trail.
- TSLA rises to $220 - your stop moves up to $210
- TSLA rises to $240 - your stop moves up to $230
- TSLA drops to $230 - your shares are sold automatically
You could potentially lock in your gains without placing a single manual order.