A question on stop orders

Discussion in 'Order Execution' started by ciccio, Jul 6, 2018.

  1. ciccio


    I know that a Stop Order is an order to buy or sell a security once the
    price of the security reaches a specified value, known as the "stop
    price." When this stop price is reached, the order automatically turns
    into a market order and is executed as soon as possible at the current
    market price.

    My Question: is the time of this new “market order” equal to the
    initial “stop order” submission time or is it the time when the ”stop
    order” turns into a “market order” ?

    Here’s an example:
    XYZ is currently trading at $20.50, and trader “1” sumbits a stop order
    to sell at $20.00.
    Later, trader “2” submits a “Market Order” for a huge quantity.
    What happens when the price reaches $20.00 ?

    Is the “market order” or “stop order” the one who has time priority ?

    Thank you
  2. Robert Morse

    Robert Morse Sponsor

    When your stop order is triggered, the stop order is deleted and replaced with a new market order. Time priority would be based on when the market order reaches the exchange order book.
    comagnum, CSEtrader and ciccio like this.
  3. lindq


    Much will depend on how your broker handles stop orders, and how you ask your broker to handle them. Are they hidden?

    But a market order that is entered precisely at the same time as your stop price is hit, is most likely going to be filled first, if only because it takes time for your stop to be processed and sent to the market as a market order.
  4. qxr1011


    in theory the answers above cover the situation

    in practice if nothing is going on in the market you will be executed almost instantaneously upon your market order reaches the market maker...as in the theory

    but if it is major movement happens in the market , then the execution of your market order will be probably delayed, and you may be executed at the worst possible price when the market settles down... in fact you may see that the market made a u-turn and your order executed on the bottom of it :)

    so I would recommend to consider the stop-limit order...also in this case you risking not being executed at all...
    beginner66, padutrader and CSEtrader like this.