Traders use stop-loss orders by setting the maximum they’re willing to lose. If the price of a security drops below that value, the stop loss becomes a market order.A trailing stop is similar. It can be a fixed percentage of, say, 5%, or a fixed spread of a certain dollar amount that follows the day’s high. Once set, if the price drops below the trailing-stop value, the stop loss is triggered. Stop losses can be manually adjusted, but trailing stops automatically shadow price movements to minimize losses and protect profits. Combining them is one of the best ways to maximize their benefits. For example, a stop loss could be set at 2% and the trailing stop at 2.5%. As the stock’s price climbs, the trailing stop will pass the stop loss and render it obsolete. As the price continues to climb, potential losses are further minimized. Traders can tighten the trailing loss to, for example, 1.75%. At the very least, the move secures a breakeven point while locking in profits, which is never a bad play. To make it work, set a trail value that accommodates normal price fluctuations, and then tighten the trailing stop spread when the moving average changes direction.