How do trailing stops work?
Trailing stop disclaimer:
thinkorswim does not recommend trailing stop orders, as there is no guarantee that your order will be filled at or near the designated stop price, which is especially dangerous in rapidly rising or falling markets. In addition, trailing stop orders will accentuate volatility in rough markets.

A trailing stop allows you to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain. A trailing stop SELL (BUY) order is an order where the stop price is set at some fixed amount away from the asset's bid (ask). If the market price rises (falls), the stop loss price also rises (falls) by this fixed amount. If the stock price falls (rises), the stop price remains the same. When the market moves against the position by the set amount, the stop order is triggered, and is submitted as a market order.

For example, XYZ shows a price of 50.00. A customer puts in a trailing stop order to sell at $1.00 below the current bid. A stop order is entered into the system for $49.00. When the bid price rises to $52.00, the stop order price rises to $51.00. When the bid price drops to $51.50, the stop order price remains at $51.00. When the ask price drops to $51.00, the stop order is triggered and submitted as a market order.

NOTE: The market order resulting from a triggered trailing stop order is not guaranteed to execute at any specific price. A trailing stop sell order becomes a market order when the last traded price is less than or equal to the stop price or if the ask price is less than or equal to the stop price (which is determined by the highest bid price after the tralstop is entered.) Trailing stop sell orders for Nasdaq stocks and US equity options are only triggered after two ask prices are less than or equal to the stop price.

A trailing stop buy order becomes a market order when the last traded price is greater than or equal to the stop price (which is set at a specified differential above the lowest offer). Trailing stop buy orders for Nasdaq stocks and US equity options are only triggered after two bid prices are greater than or equal to the stop price. For US equities markets, stop orders will only be elected by prices posted during normal NYSE trading hours.
DOW NYSE S&P Nasdaq
  Name Last Chg %Chg
DOW 30 16,408.54 -16.31 -0.099
NYSE comp 10,532.827 27.041 0.257
S&P 500 1,864.85 2.54 0.136
NASDAQ 4,095.516 0.00 0.00