Trailing Stop Orders: The 2025 Guide for Smarter Investing

Australian investors are navigating a market that’s more dynamic than ever in 2025. With volatility on the rise and digital trading platforms making execution lightning-fast, protecting your profits—and limiting your losses—has never been more important. One tool that’s increasingly being used by both seasoned traders and everyday investors is the trailing stop order.

What Is a Trailing Stop and How Does It Work?

A trailing stop is a type of stop-loss order that automatically adjusts as the price of an asset moves in your favour. Unlike a fixed stop-loss, which stays at a set price, a trailing stop “trails” the market price by a specified amount or percentage. If the market moves up, the stop moves up too; if the market turns, the stop remains at its last level, locking in profits or limiting losses.

• Example: You buy CSL Limited shares at $280 and set a trailing stop at $14 (5%). If CSL rises to $300, your stop automatically moves up to $286. If CSL then dips to $286, your shares are sold—locking in a $6 gain per share.

Trailing stops can be set as either a dollar amount or a percentage. Many trading platforms in Australia, including CommSec and SelfWealth, now offer trailing stop orders for both shares and ETFs.

Trailing Stops in 2025: Why They Matter Now

Several trends in 2025 make trailing stops especially relevant for Australian investors:

• Market Volatility: The ASX has seen increased swings due to global interest rate changes and tech sector disruption. Trailing stops can help you ride the upside without getting caught in sudden downturns.
• Algorithmic Trading: More retail investors are competing with automated trading systems. Trailing stops help level the playing field by automating exit strategies.
• Tax-Efficient Selling: With new ATO guidance in 2025 tightening reporting on short-term capital gains, strategic use of trailing stops can help investors manage taxable events more precisely.

Major Australian brokers have updated their platforms to offer more flexible trailing stop options, allowing for intra-day execution and customisable thresholds, in response to investor demand for better risk management tools.

When and How Should You Use a Trailing Stop?

Trailing stops aren’t just for active traders. Long-term investors can benefit, too, particularly when markets are frothy or when holding volatile stocks. Here’s how to use them effectively in 2025:

• Setting the Right Distance: Too tight, and you risk being stopped out by normal price fluctuations. Too loose, and you might give back too much profit. For blue-chip ASX shares, a 5-10% trailing stop is common; for high-growth or tech stocks, 10-20% may be more appropriate.
• Review Regularly: As your investment goals or market conditions change, review and adjust your trailing stops. Some platforms now allow you to automate this process based on volatility indicators.
• Don’t “Set and Forget”: While trailing stops automate the exit, they don’t replace regular portfolio reviews. In fast-moving markets, a sudden gap-down can still result in a sale below your stop price.

For example, after the February 2025 tech sell-off, many investors who had trailing stops in place managed to capture gains from the January rally—while those without stops saw their profits evaporate.

Trailing Stops: The Fine Print in 2025

It’s important to understand how different brokers execute trailing stops. Some offer “market” stop orders (selling at the next available price), while others use “limit” stops (selling only at your stop price or better). In volatile conditions, this can make a significant difference.

• Platform Features: In 2025, leading Australian brokers like NabTrade and CMC Markets have enhanced their trailing stop offerings, with mobile notifications and dynamic trailing options linked to real-time ASX data.
• ETF and Managed Fund Support: More platforms now allow trailing stops on popular ETFs, offering protection for diversified portfolios—not just individual shares.

With new regulatory scrutiny in 2025 around “best execution” practices, brokers are also required to disclose how stop orders are handled during market gaps or low-liquidity periods. This transparency helps investors make more informed decisions about which platform to use and how to structure their trades.