trailing stop loss vs limit

Discussion in 'Order Execution' started by davidw0903, Jul 26, 2006.

  1. davidw0903

    davidw0903 Guest

    Still a little fuzzy on what a trailing stop limit is.
    Found very little info on it.
    I believe the training stop limit is similar to the loss but the stop limit is based on the stop limit order?
    The little info I have is that is that the order executed with the stop loss is a market order. The limit order is based on the stop price? So the limit order is equal to the final stop price?
     
  2. trailing stop market = market order
    trailing stop limit = limit order

    Some applications have it worded differently, but should be able to figure it out, or at least ask the developer of the software.
     
  3. qazmax

    qazmax

    Stops can be either market or limit orders. This depends on your broker setup. Some have a stop that is a trigger to release a market order and other have a hard limit order.

    Trailing just means the stop order moves with the market price. If your trailing stop is .25 below market and the stock is going up, then the stop will go up with it. When the stock goes down the trailing stop will maintain its last price (.25 below) until filled or the stock begins rising again.

    :)
     
  4. Is the trailing-stop an order with the markets? Or is it a function of the software that continually sets a new stop order and cancels the old one as prices move up?

    "The little info I have is that is that the order executed with the stop loss is a market order. The limit order is based on the stop price? So the limit order is equal to the final stop price?"

    Yes, I guess you're thinking of the two kinds of "stop" orders. Both of these are "stop" because they are selling at below market price. The "stop" is required or else it'll get filled automatically and immediately. For example, if current price is 100 and you enter order to "sell @ 95", it'll be executed right away. So "sell @ 95 stop" means don't sell until prices hit 95. Then the two kinds of "stop" order breaks down as follows:

    1. STOP (market) - when prices drop to your stop price (trigger), say, 95, it's sold at market

    2. STOP-LIMIT - when prices drop to your stop price of 95, the order becomes active with a price-limit. It may or may not be the same as the stop price. So you may have an order of "sell @ 95-stop, 94-limit", meaning to trigger the order when prices drop to 95, but sell only at 94 or higher.

    Problem with stop-limits is that your order may execute at the stop price, but may not get filled at all due to the limit price.