How to Place a Trailing Stop Loss Order on Fidelity

If you’re looking to secure your investments and maximize your potential gains, understanding how to place a trailing stop loss order on Fidelity is essential. In this comprehensive guide, we’ll dive deep into what trailing stop loss orders are, why they matter, and how you can effectively use them on Fidelity’s trading platform.

What is a Trailing Stop Loss Order?

A trailing stop loss order is a type of order that helps you lock in profits by setting a stop price that trails the market price. Unlike a standard stop loss order, which remains fixed, a trailing stop loss order adjusts automatically as the market price fluctuates. This means that if the price of your stock rises, the stop price rises with it, but if the price falls, the stop price remains where it was last set, thus helping to protect your gains.

Why Use a Trailing Stop Loss Order?

The beauty of a trailing stop loss order is that it provides both flexibility and protection. Here’s why you might want to use one:

• Lock in Profits: As the price of your investment increases, the trailing stop loss order helps you capture more gains.
• Limit Losses: If the price reverses and hits the trailing stop price, your order becomes a market order, potentially limiting your losses.
• Automated Management: It requires less manual intervention compared to regular stop loss orders, as it adjusts automatically with price movements.

How to Place a Trailing Stop Loss Order on Fidelity

Fidelity’s trading platform offers a straightforward process for placing a trailing stop loss order. Here’s a step-by-step guide:

Step 1: Log In to Your Fidelity Account

Start by logging into your Fidelity account. Ensure you have all the necessary credentials and access to the account where you wish to place the order.

Step 2: Navigate to the Trading Section

Once logged in, go to the "Trade" section of the platform. This is where you’ll find options for buying and selling securities.

Step 3: Select the Security

Choose the security (stock, ETF, etc.) for which you want to set up the trailing stop loss order. You can find your securities under the "Portfolio" or "Watchlist" section.

Step 4: Choose the Order Type

In the order entry window, select "Sell" if you’re placing a trailing stop loss on a position you already own. Then, choose "Trailing Stop" from the order type options. Fidelity typically offers a trailing stop loss order with a percentage or dollar amount.

Step 5: Set the Trailing Stop Parameters

Specify the trailing stop parameters. You can choose either a dollar amount or a percentage. For example, if you set a trailing stop at $2, the stop price will trail $2 below the highest market price achieved. Alternatively, setting a trailing stop at 5% means the stop price will be 5% below the highest market price.

Step 6: Review and Confirm

Review the details of your trailing stop loss order to ensure everything is correct. Check the security, the stop parameters, and any additional conditions. Once satisfied, confirm the order.

Step 7: Monitor Your Order

After placing the order, monitor the performance of your trailing stop loss. Fidelity provides real-time updates, so you can see how your stop price adjusts with market movements.

Tips for Using Trailing Stop Loss Orders

To get the most out of your trailing stop loss orders, consider these tips:

• Choose the Right Distance: Setting the trailing stop too close might trigger the stop price prematurely, while setting it too far might not protect your gains effectively.
• Understand Market Conditions: Be aware of market volatility, as it can affect the performance of your trailing stop loss order.
• Regularly Review Your Orders: Periodically review your trailing stop loss orders to ensure they align with your investment strategy.

Common Mistakes to Avoid

When placing trailing stop loss orders, investors often make a few common mistakes:

• Setting an Inappropriate Trailing Amount: Choosing a trailing amount that is too tight or too loose can impact your trade outcomes.
• Ignoring Market Conditions: Not considering market volatility can lead to premature stop-outs or missed opportunities.
• Overreliance on Automation: While trailing stop loss orders are useful, they shouldn’t be your only strategy for managing trades.

Advanced Strategies for Trailing Stop Loss Orders

For more advanced traders, there are strategies to optimize trailing stop loss orders:

• Combining with Technical Analysis: Use technical indicators to set trailing stops more strategically.
• Adjusting in Real-Time: Adapt your trailing stop loss settings based on real-time market analysis and news.

Conclusion

Placing a trailing stop loss order on Fidelity can be a powerful tool for managing your trades and securing your investments. By understanding how to set and use these orders effectively, you can protect your gains and limit your losses. With Fidelity’s user-friendly platform, setting up a trailing stop loss is a straightforward process, but always remember to monitor and adjust your orders as needed.