In financial markets traders often protect their position from a signi
ficant decline by using a trailing stop. Assume the trader is long the
market (owns the security). A trailing stop is an order to sell the s
ecurity at the market, if the price of the security drops to the stop
price. The stop price is always less than the market price when the st
op is entered. As the price fluctuates, the stop is raised to remain a
fixed distance from the maximum price at which the security trades. I
n this paper we consider two models for the price process: a discrete
time random walk and continuous time Brownian motion, both with positi
ve drift. For these price processes we compute the distribution, mean,
and variance of the gain to the trader as well as the duration of the
trade when a trailing stop strategy is used. Also discussed is the qu
estion of optimizing the distance from the current price to the stop.