When you place a Trailing Stop Loss order, you will need to enter a trailing gap. If the market moves in your direction, the stop-loss follows the Last Traded Price (LTP) of the stock by the trailing gap set by you. The order is triggered when the LTP breaches the stop-loss price, i.e. the stop loss is hit.

Example:

A user is placing a sell trailing stop-loss order.

The current LTP of the scrip XYZ is 100 and you set a Stop-loss at ₹95 with a Trailing gap of 1 and Limit price of ₹94.

LTP	Stop-loss (Trigger price)	Limit Price
₹100	₹95	₹94
₹101	₹96	₹95
₹104	₹99	₹98
₹104.5	₹99	₹98
₹105	₹100	₹99
₹103	₹100	₹99
₹100	Stop-loss triggered at 100	Limit order placed at 99

As shown in the table above, the correlation between the Last Traded Price (LTP) and the Stop-loss value is illustrated.

The initial LTP when the Trailing Stop Loss order is placed was ₹100, so it is taken as the base for calculation.

In this case, the trailing gap is ₹1, meaning that for every 1 point move in the LTP, the Stop-loss value will move by the same value in the same direction.

So, as the user starts making a profit (in favour of LTP movement):

• When the LTP is ₹101, the Stop-loss moves to ₹96.
• When the LTP moves to ₹104, the Stop-loss also moves by 3 points to ₹99.
• Now, when the LTP moves to ₹104.5, the Stop-loss remains the same as the trailing gap is set as 1, so it will wait for a 1 point movement from the previous set price, i.e., ₹104.
• So, when the LTP reaches ₹105, the Stop-loss moves to ₹100.
• When the LTP moves down to ₹103, the Stop-loss remains at ₹100 and is triggered when the LTP finally reaches ₹100.
• A limit order is triggered once the Trailing Stop-loss order is triggered.