How does a trailing stop-loss work?

You set an initial stop-loss level and a trailing distance, say ₹5 or 2% below the current price for a long position. As the stock price rises, the stop level automatically moves up to maintain that same distance from the new high, but it never moves down if the price dips temporarily; it just stays wherever it last adjusted to. For example, if you buy at ₹500 with a ₹10 trailing stop, your initial stop is at ₹490. If the stock rises to ₹520, your stop moves up to ₹510, and if it then falls to ₹512, the stop stays at ₹510 rather than moving down, only triggering if the price actually falls to ₹510 or below. This means a trailing stop locks in profit as the trade moves in your favour while still giving the position room to breathe on normal pullbacks, as long as the pullback doesn’t exceed your chosen trailing distance.