Trader333
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The stop orders on IB are not good enough in my view and I dont use them and havent done for a long time. What you will find is that you will eventually get filled but a long way from where you wanted to. In my view you would be better off using a third party add on that will send an order once your price limit is reached.
Paul
Paul
peterpr
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plum said:
Plum
Stop limits are for limiting loss. Limits are for realising profits so:
Why would you use a stop/limit order in the circumstances you describe? A sell limit order executes at the specified price or higher (a buy/limit at the specified price or lower), so, to take profits from a previous buy, you don't need the stop part. However, if you wanted to limit loss on the same purchase, the stop IS needed because, if the price has not yet fallen to your loss tolerance price, a limit sell order at that price would execute immediately.
Don't know why your S/L didn't execute though. Most Exchange limit orders have some post hit tolerance so the price would have to move back very sharply indeed for it not to execute. It is possible that, during the time taken for the stop to activate the limit part of the order, the price did move back such that the price was not seen by the limit order. The norm with IB is for the stop to initiate transmission of the limit order to the exchange - so there can be some delay.
There are also special rules regarding 'out of hours' orders. Have a look at the text on the TWS Configure/order/stop trigger method menu for details. Also worth perusing the IB order types page at: http://www.interactivebrokers.com/php/tradingInfo/orderTypesMatrix.php?ib_entity=IB-UK
I think there's a bit of confusion about the difference between stop and stop limit orders here. I don't use IB myself, but could it be that you placed a stop limit rather than a conventional stop order?
A stop order is simply an order to buy or sell at a worse price than is currently trading (e.g market is $10.50, sell at $10.20). In these cases, should the price fall to $10.20 you should execute at market. A stop limit is slightly different. This means if the price reaches your level, place a limit order at your specified price. (e.g if the price falls to $10.20, work a limit to sell at $10.20). This can prevent you taking out snake in the grass bids, minimising slippage, but you run the risk of missing your price entirely.
The big problem brokers have is that few exchanges accept stop orders (I think Eurex is about the only one). Most brokerages therefore have to work them on their own systems - you are inevitably leaving a lot to the discretion of the dealer. If the market has just been slammed, the dealer than has to judge whether to hit the bids - establishing a new low perhaps- or wait for the book to rebuild and achieve a better price. This is why many firms will only work stop limits (where you specify the minimum price) rather than stop orders.
A stop order is simply an order to buy or sell at a worse price than is currently trading (e.g market is $10.50, sell at $10.20). In these cases, should the price fall to $10.20 you should execute at market. A stop limit is slightly different. This means if the price reaches your level, place a limit order at your specified price. (e.g if the price falls to $10.20, work a limit to sell at $10.20). This can prevent you taking out snake in the grass bids, minimising slippage, but you run the risk of missing your price entirely.
The big problem brokers have is that few exchanges accept stop orders (I think Eurex is about the only one). Most brokerages therefore have to work them on their own systems - you are inevitably leaving a lot to the discretion of the dealer. If the market has just been slammed, the dealer than has to judge whether to hit the bids - establishing a new low perhaps- or wait for the book to rebuild and achieve a better price. This is why many firms will only work stop limits (where you specify the minimum price) rather than stop orders.
Salty Gibbon
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Totally agree with this. It is a very rare thing to get stopped out on IB at your desired price and you can go way beyond before getting the stop order filled, depending on the liquidity of the stock being traded. I normally compensate for this by entering a stop order which is a few cents away from where I actually wany to be stopped out. eg in a long trade, if I want to be stopped out at 45.56, I will often enter my stop order at 45.59 say. But it depends on the stock. With a highly liquid stock, eg YHOO, you do tend to get filled more or less at the correct price.
peterpr
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Plum
You need to understand the mechanics of order execution.
As NS says, the norm for stop orders and their variants is for the broker (ie IB in this case) to simulate them. This means that, when your specified stop price is hit, IB either send a market order to the exchange or, in the case of a stop/limit, a limit order. The point being that it is a two stage process and the exchange knows nothing about your 'order' until IB are prompted to send it by the stop being hit.
You need to understand just who is responsible for which bits, the transmission mechanisms and the way in which unfilled orders are handled out of hours. It's all there in the IB documentation but does take a while to master
You need to understand the mechanics of order execution.
As NS says, the norm for stop orders and their variants is for the broker (ie IB in this case) to simulate them. This means that, when your specified stop price is hit, IB either send a market order to the exchange or, in the case of a stop/limit, a limit order. The point being that it is a two stage process and the exchange knows nothing about your 'order' until IB are prompted to send it by the stop being hit.
You need to understand just who is responsible for which bits, the transmission mechanisms and the way in which unfilled orders are handled out of hours. It's all there in the IB documentation but does take a while to master
