How do you use a trailing stop when buying stocks?

Question

I have Ameritrade and I want to make sure I use the trailing stop feature correctly.

Lets say I buy 100 shares of stock xyz for $10.00/share. Lets say I immediately place a trailing stop sell order for lets say 5%. First can I do this or do I have to wait for the stock to go up? and does this mean if I place the trailing stop order if the stock drops to $9.50 it will automatically sell but if the stock goes up so the the trailing stop?

Answer 1

Trailing Stop........ Upon entry the 5% is caculated at that point. If the stock goes down, the trailing stop does not change. If the stock goes up, your stop will be at 5% less than the highest amount that it's gone up.

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Answer 2

You sound like you have the gist of it. How do the charts look for the stock? Is it very volatile? Stop loss, not profit.