Stop Loss paired with a GTC limit ie 'straddling' the current MP

[Takedown]

From what everyone around me always says, (in the US at least) it is against market rules to place a trade like this where you are essentially straddling the market price of the stock.

IE - stock currently trading at $25. Person would like to limit loss by placing a stop-loss at $22. They would also like to place a $30 GTC sell on the same lot. Thus the strategy is if it hits their price target of $30 they'll take their profit, but they are protected on the downside with the stop-loss.


Seems relatively vanilla to me, but I'm told you cannot do this. Perhaps it stems from having 2 orders out on the same lot at the same time? Is anyone familiar with that, and, if so can you point me in the direction of some sort of official documentation online stating that this cannot be done? The only thing I find is websites talking about a Stop-Loss-Limit order, where once the target price is reached, the order turns into a limit order, which is not the scenario I'm speaking of.


Thanks

 

[pboyles]

From what everyone around me always says, (in the US at least) it is against market rules to place a trade like this where you are essentially straddling the market price of the stock.

IE - stock currently trading at $25. Person would like to limit loss by placing a stop-loss at $22. They would also like to place a $30 GTC sell on the same lot. Thus the strategy is if it hits their price target of $30 they'll take their profit, but they are protected on the downside with the stop-loss.


Seems relatively vanilla to me, but I'm told you cannot do this. Is anyone familiar with that, and, if so can you point me in the direction of some sort of official documentation online stating that this cannot be done? The only thing I find is websites talking about a Stop-Loss-Limit order, where once the target price is reached, the order turns into a limit order, which is not the scenario I'm speaking of.


Thanks

You mean you are placing a stoploss and take profit (limit order)? Why would that not be allowed, how else would you trade?

 

[Takedown]

Yes, thats my question. You basically have 2 orders out on the same stock, one covering your downside and the other would be there to trigger your profit-taking point on the upside.

How else would you trade it? I dont know, put a GTC sell at your target and protect your downside with puts with a strike of $22 in this case I guess. But thats my question. I'm not the one saying you can't do it, I'm trying to confirm what I've been told...

 

[PualoP]

I think who ever told you that is an idiot. I would recommend never taking any trading related advice from that person again.

 

[Sang Froid]

Could it be perhaps that the person who gave you the advice was a tad mistaken?

He may have perhaps meant that what you can't do(in the US at least I think it might be against some kind of law?) is hedge and I know with MT5 it wont let you have hedge pending orders even. For Example:

You place a Buy Stop at 1.470 with a T/P at 1.500 and a S/L at 1.400 this is fine but you couldn't then place a Sell Stop at 1.4500 as this would mean you are hedged (one buy order and one sell order in the market place). So..... if you in fact turn your S/L at 1.400 into a Sell Stop MT5 wont let you place the order unless you close the original order first...... at least I think as to be honest "I know nath-ing"