Clarification on stop orders

[FTSEBOY]

Before taking the plunge on Monday, I just need to clarify something thats been nagging with STOP orders:-

Scenario 1:-

If I go LONG 2 @ 5000-00 and the market trades up to 5050-00. I then subsequently put in a SHORT 2 @ 5040-00, this trade will not get hit until the market falls back down.


Scenario 2 :-

If I go SHORT 2 @ 5000-00 and the market trades down to 4950-00. I then put in a STOP of BUY 2 @4960-00, again this wouldn't get hit until the market rose again.

For both examples I am simply try to lock in unrealised profit. Have I got this right?
Cheers
FTSEBOY

 

[oatman]

It would be a sell 2 on STOP. Not short 2. You are liquidating a long, not going short. Otherwise OK and

Good luck

 

[FTSEBOY]

Thanks Oastman. So basically by using this I won't get taken out of the game too early and just move my stop up or down.

 

[oatman]

Not wishing to confuse you too much , you could use a Trailing Stop. eg. You pay 4000, the market goes to 4030 so you put in a 10point trailing stop. If the market reverses 10 points from your level, you've sold, so you're out at 20. If the market moved up to 43 for instance then your 10 point trailing stop moves up to 33 and so on......good isn't it? :cheesy:

 

[FTSEBOY]

Oatman,
I've just checked on the IB order sheet and there are :-

STOP
STOP LIMIT
TRAIL

Do you know what the differences are?
FTSEBOY

 

[oatman]

Yes :cheesy:

 

[FTSEBOY]

Oatman,
I'm sure you do know the differences. Don't suppose you could tell me the differences ar and in what kind of market conditions you would apply them?
Cheers
FTSEBOY

 

[peto]

Your best bet is to read the comprehensive documentation that IB provide on the website, and to experiment with all the options and get a general familiarity with the platform using the excellent Demo Platform (Its the same as the real trading platform except the data feeds are unrealistic). It's available on weekends.

But if you need a quick answer:

TRAIL: Exactly as discribed by Oatman in his recent post about 'trailing stop'

STOP: As you put it in your first post: A market order is activated when the last price traded reaches your level. Check under the 'configure-order' menu that it's set to activate the stop the first time the price is hit (or change to suit yourself).

LIMIT STOP: As above but a limit order is initiated instead. You will have to set the limit price as well as the stop price. The advantage is that you will avoid the risk of getting a really bad fill
on a market order, disadvantage is that there is a risk in a fast moving market that the price will jump beyond the limit price before you are filled, leaving your position unprotected.

 

[oatman]

Ftseboy, I was only having a laugh I was in a hurry.
There is a Glossary under Learning at the top of this page which might be useful to you.

Cheers

 

[sidinuk]

with IB, stop orders are held by IB until it's hit then they send a market order through, a stop-limit order is placed directly at the exchange. I trade ES and use stop-limit orders where the limit price is a long way from the stop price. This way I know the order is working at the exchange and not held by IB, your then covered if IB's computer goes down. Obviously if Globex goes down we're all stuffed! With ES at least you very rarely get filled more than 1 tick from your stop price anyway so it doesn't matter where the limit is.