[B]Hi,
I have two questions.
If this happens in chronological order:
In this case the price dropped by more than the stoploss order, before the stoploss order was placed.
My questions are, would I be able to place the stop order? Would the stoploss still be triggered?
Thanks a lot[/B]
No. You would not be able to place your STOP at 1.4980
SELL STOP orders must be placed below the current BID PRICE.
Many brokers specify that SELL STOPS must be placed [B]a certain number of pips[/B] below the current BID PRICE (2 pips, for example). If this were your broker’s policy, then in the example you gave, your STOP would have to be placed at 1.4948 (or lower), provided the BID PRICE was still at, or above, 1.4950.
No. In the scenario you outlined, [B]there would be no stop-loss.[/B]
[B]Your trading platform would not accept your order[/B] to place a sell stop at 1.4980, when the current bid price was 1.4950. Most likely, an error message would inform you that your sell stop must be placed below the current bid price.
.
Thanks Clint !! That clarified my doubts !!
I guess that means my trading program would be facing a problem placing stoploss orders in a fast moving market. Am I right?
That’s a very generalized question, to which I can only offer a very generalized answer.
If you are talking about [B]manually placing orders[/B] in a 2-step, or 3-step process [B]in a fast-moving market,[/B] then it will, indeed, be difficult to achieve any sort of precision in picking the prices at which your orders will trigger.
Specifically, if your trading methodology involves [B]chasing price[/B] in fast moving markets, and each trade consists of 3 steps — (1) manually entering on a market order, then (2) manually adding a stop-loss to your position, and finally, (3) either manually adding a take-profit (limit) order to your position, or manually exiting your position on a market order — you may well be “facing a problem” (or several problems), as you suggested in your question, not the least of which is placing your various orders at specific price points, with anything resembling precision.
Beyond that, I can’t offer an answer to your question. You haven’t given me nearly enough information about how you are trading, for me to even visualize one of your trades.
The only thing I can add is this: In your post #1, you seemed to be describing a situation in which you were trading in the [B]wrong direction.[/B] Your example clearly involved a LONG position in a market headed south. Are you saying that this is the way you typically trade? If so, why?
Normally, traders who chase price jump on board [B]in the direction of price movement.[/B]
Again, I’m not able to visualize the sort of trading you are asking about.
.
Sorry Clint for not being clear in my description.
My problem lies in automated trading (program trading).
If I place an order to enter a trade, while at the same time also place a stoploss order to go with it, I noticed that it takes a little while for the stoploss order to take effect. So I’m worried that if the price moves in the opposite direction of my trade before the stoploss takes effect, the stoploss order might not be placed at all. If this happens, which is possible in a fast moving market, I might end up with a position without a stoploss which can be very dangerous.
In my readings, I learned that a stop order is an order placed [B]“at a specified price or worse”[/B], which would not be necessarily true according to your explanation of how stoploss orders work. Because if I place a sell stop order at 1.1000 while the price is at 1.0950, if the sell stop gets executed, it would be at 1.0950 which is “worse” than 1.1000. According to what I learned, the sell stop order would be executed immediately at the time the order is placed. But according to your explanation, the sell stop order wouldn’t be placed at all. This is why I’m worried about this problem. It can be dangerous especially with automated trading left running when I go to bed at night, because [B]I could end up with an open position without a stoploss[/B]. Am I understanding the situation correctly?
There are two issues here.
They are separate and distinct, so let’s be sure that we deal with them separately.
B[/B] You are experiencing delays in the placing of stop-loss orders.
If I understand your situation, you want your automated trading program to open a new position and simultaneously place the order for a protective stop-loss; however, you are experiencing a delay in the placing of the stop-loss, and you are exposed to additional risk because of this delay.
This appears to be a problem with your automated trading system. However, I don’t do automated trading, so I’m not the person to advise you on how to solve this problem.
All of my trading is discretionary trading, and most of it is done using “resting orders” in a “set-and-forget” methodology. That is, I decide on a particular trade, contingent on price reaching a certain target level. My resting order, to enter a new position either LONG or SHORT, always includes a stop-loss (which is a separate order, but linked to the entry order); and my entry order often includes a take-profit order (which also is a separate order, but linked to the entry order). So, my resting order is actually two or three orders.
When price triggers my entry order, it becomes a market order and is [B]executed immediately.[/B] My stop-loss and take-profit orders get [B]placed immediately[/B] (without the delay you are concerned with), and they sit as resting orders until price triggers one of them, or until I manually close my trade.
The point of that long description is that, like your automated system, my resting order to enter (together with the SL and TP linked to it) might trigger while I’m sleeping. But, I have no worry that my SL and TP orders will be entered late, or not at all, [B]under normal market conditions.[/B] Is it possible for extraordinary volatility to whipsaw the market around my entry order, making it impossible for my predetermined SL to be entered as a resting order? Yes, it’s possible, but apparently very unlikely, because it hasn’t happened to me.
If that’s happening to [I]your[/I] SL orders, then talk to the broker handling your trades, or the designer of the automated trading system you are using.
B[/B] Either the terminology you are using is incorrect, or your understanding of stop orders is incorrect.
As I explained in my previous post, you CANNOT place a sell-stop order ABOVE the current bid price.
A sell-stop order MUST be placed BELOW the current bid price.
Therefore, you CANNOT “place a sell stop order at 1.1000 while the price is at 1.0950.”
I don’t know how else to say it.
Maybe this post will help you sort out the terminology, and the concepts, associated with sell stop orders, as well as all the other order types —
.
Thank you very much, Clint !! I greatly appreciate your replies !!
Stop loss is used to limit your loss. It is of no use when something has already happened. If train left the platform and then you are buying ticket for the same train that is of no use. Similarly in your case, you can’t fix stop loss after market crashed by 50 pips nor your stop loss will be triggered. To use stop loss, you need to set stop loss while you enter a trade. For example: you enter a trade at 1.5000 and a stop loss at 1.4980, and there is crash of 50 pips in one go, it is not assured your loss will be stopped at 1.4980, your loss will stop at nearest fill, loss could be 20pips or more. But if market moment is 2-3 pips, your stop loss will definitely trigger at 1.4980. [I]Stop loss can be fixed only at a lesser price than bid price.[/I]
Thank you for your post, Andrea !
Well its impossible because the price already passed this level and STOP Loss can be set only below the current bid price.
Although you should discern Sell Stop order and Stop Loss order because first is entry order second is closing order.
Thanks profitbaby !!