• Learn about investing
• Limits and alerts
• Buy/sell limits
• Stop-loss limits
• Tracking stop-loss limit
• Limit safeguard

Tracking stop-loss limit

Tracking stop-loss

A tracking stop-loss (or trailing stop-loss) offers an added advantage to a stop-loss limit by allowing you to lock in profits as share prices rise and sell the shares when their value falls by a value decided by you.

With The Share Centre limits can be:

• Set free of charge
• Used for 1 trading day or up to 365 days
• Applied to some or all of your shares

How does a tracking stop-loss work?

You set a margin (e.g. 10p) below the price at which you would sell. If the share price rises, the tracking stop-loss value follows the price up but does not execute. If the share price falls however, by more than the value you set, the order executes and the shares are sold. This allows you to limit the amount you may lose and to lock in profits.

Tracking stop-loss example

You buy a share for 105p and set a tracking stop-loss of 10p.

The price falls to 102p*, then rises to 135p before falling back again to 90p (see red line in chart below).

The tracking stop-loss will be triggered to be sold when the price drops to 125p or below (10p less than the peak of 135p) - so you have locked in a gain.

* If the price had dropped to 95p or below, the shares would have been sold

Will the share be sold at the limit you set?

Not necessarily. The limit you set is a trigger for the share to be sold but it can take some seconds for the deal to go through, during which time the price may change up or down, particularly during volatile market conditions or with shares which have high liquidity.

There could also be occasions when the share price drops straight through the limit you set. If this happens the sale would take place at the appropriate market price, not at the limit price.