WordPress.org’s Plugin Directory works based on the information found in the field Stable Tag in the readme. When WordPress.org parses the readme.txt, the very first thing it does is to look at the readme.txt in the /trunk directory, where it reads the “Stable Tag” line. If the Stable Tag is missing, or is set to “trunk”, then the version of the plugin in /trunk is considered to be the stable version. If the Stable Tag is set to anything else, then it will go and look in /tags/ for the referenced version. So a Stable Tag of “1.2.3” will make it look for /tags/1.2.3/.
If you do not use a stable tag, everything will be read from the trunk location.
You can read more about it HERE.
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