No, stop orders are placed in the direction of the trend whereas MIT are placed counter-trend. A sell MIT is placed above the market, a sell stop is placed below the market. A buy MIT is placed below the market, a buy stop is placed above. If these orders are used to liquidate, the MIT limits the profit (from the current market price) and the stop limits the loss. Both of these become market orders once touched. Not all exchanges take MIT orders.
>A sell MIT is placed above the market, a sell stop is >placed below the market. A buy MIT is placed below >the market, a buy stop is placed above. I'm confused with your terminology. I place IB sell stops *both above and below the market* depending on whether I am protecting my bankroll or my profits. Buy stops are also placed on each side regularly and for the same reasons. Are you saying that the official term for a sell stop above the market is a "sell MIT"? JB
Yes, See definition of "Market-if-Touched Order". <A HREF="http://www.futuresplus.com/glossary.stm#Market-if-touched%20order" target="_blank">http://www.futuresplus.com/glossary.stm#Market-if-touched order</A>
I have found it useful to think of MIT orders as LIMIT orders that turn into market orders as soon as a trade happens at the limit price or better. So e.g for a long position buy stop (loss) are below the entry price, MIT or LIMIT's are above the entry price.
Thanks for the information and link dottam. >I have found it useful to think of MIT orders as >LIMIT orders that turn into market orders as soon >as a trade happens at the limit price or better. >So e.g for a long position buy stop (loss) are >below the entry price, MIT or LIMIT's are above >the entry price. Not to sound contrary, but the whole MIT thing just complicates it for me and I'll think I'll just forget about it even though it is obviously technically correct. I think of these things as simply setting a trigger price (either above or below the market) and when the trigger is reached, my order either buys or sell, limit or market depending on the situation.
One of the reasons differentiation between stop & MIT orders exist is that before days of electronic order entry, RT quotes, & direct access to trading floor, there is a delay between when you phone in your order and when it arrives on the floor. If your order is to "buy SP 800.00 stop" when the market was at 790.90, but by the time your order arrived on the floor the market is now at 800.10, is your order now a market order or is it really an MIT order? Note that some brokers when calling in orders will either treat a "stop" order that was intended to be an "MIT" order as a market order if close to the market. When I've made a mistake in the past the broker would either confirm with me on the phone if they are paying attention or call me back a few minutes later - in some cases the market moved adversely in the minutes it took to verify. Electronic order entry solves most of these problems.
>One of the reasons differentiation between >stop & MIT orders exist is that before days >of electronic order entry... >Electronic order entry solves most of >these problems. That makes perfect sense dottom. Thanks so much for the explaination. It's amazing what can be learned here. JB
Actually, if you call in a stop order, and the market is through your stop price when the order gets to the pit, it becomes a straight market order, not a market if touched order. If the market is at 798, and you put in a 800 buy stop, and the market is trading at 801 when it gets to the pit, it is elected and filled immediately. Some electronic systems will reject the order. If it became a MIT order, the market would have to trade back to 800 for it to get elected and then filled at the market. The purpose of an MIT order, is if you want to buy a pullback or sell a rally to a certain price and be sure of a fill. Obviously if you use a limit order and it trades at your limit price, you are not necessarily going to get filled unless it goes through. The MIT will get you a fill if it goes to your price, turns on a dime, and goes back the other direction. An easy way to keep the differences straight- With a stop order you are buying strength or selling weakness. With a MIT order, you are selling strength or buying weakness.
I'm confused by this discussion. How can MIT orders have any directional bias if they are executed when touched, from either direction, above or below the market??? (Other than the bias in the mind of the trader, as in whether he thinks the price will then go higher or lower.)