A friend of mine had a great trailing limit success story. Personally - I tried it and I'm pissed. I missed out on a solid 8% on AAPL because I set a limit that barely got touched and then the stock shot back up. Now perhaps I did it wrong... OK, most likely I did it wrong. But I now see all too clearly the potential for lost opportunity... sure you lock in some gains, but you run the risk of seriously missing out.
There's obviously no substitute for watching a stock, but if you can't, I'm starting to think strategic trailing limit orders are more appropriate than a standard trailing limit. Such as if you know a big announcement is coming, it'd be good to set them the night before, etc. I'm also thinking that in some cases it might be good to set trailing limits on only a portion of your holdings... say half. That way you sort of hedge your bet... take some profits on the upswings, but maintain some holding just in case it decides to reverse on you before you can buy back in. I mean, you believe that overall your holdings will go up with time anyway, right? ;)
That philosophy would not have served me as well with LLNW. I bought in at 8.20, it shot up to 9.20 in 5 days, and then dropped. I locked in by selling all shares on the downturn and have recently bought back in hoping for a repeat - something I had not planned on doing originally. However, it dropped well below my original 8.20 and is having trouble maintaining even that level, so I basically got lucky with my decision to sell all. A smarter approach would be to lock in a profit on a portion of my holdings, but maintain a smaller portion in case it continued up. Since I'm back in again, I would have just added to the position on the low, improving my cost basis. You just don't make as much on each sale, but it takes some of the upside risk out.