Hi, Do you use them to enter a position and what have been your experiences? Thanks for your feedback!
I generally hit bids and offers, so in a way it is limit orders. I don't like slippage so don't use Buy stops much.
Generally, it's not a good idea for day trading. I've tested it some for the ES. This instrument typically retraces and backfills a lot, so you're better off entering with a limit order on the retrace. It's rare that this instrument picks up momentum and don't look back, although it can happen. For instruments that exhibit more momentum moves, using stop orders to enter may be viable, but you're risking a bad fill. I think you're better off putting up alerts on your software and then enter using limit orders. Bottom line: Text it extensively for yourself.
It's not a good way nor is it a bad way, just depends on what your strategy is. Personally I enter 90% of my orders via a stop because I'm after momentum moves so the stop being activated would indicate momentum. Yes, slippage will often occur but that isn't always bad because it can indicate major momentum meaning a good trade.
If you use a straight stop order for entry you end up with a market order after the stop triggers. As others have pointed out, a limit order to catch a retrace is better. On IB you can enter a stop/limit order to catch breakouts but also get a better entry price. Obviously if the market is moving too fast then you may not get filled. As an example say you have a system that trades an opening range breakout. The opening range indicates a buy above $10 so you set the buy stop order at say $10.10. But you enter it as a stop/limit at $10.10 so that when price action goes above 10.10 you enter a limit order at 10.10. If price had jumped from below 10.10 to 10.50 suddenly you won't fill at 10.50 but 10.10 - IF price retraces which it frequently does. I was doing this like 8 years ago when I was trying my hand at day trading stocks using maoxian's "trading for dummies" approach.
It's not uncommon at all to use stops to enter the market and there are plenty of successful traders out there who do so. An important part of this is using smart stop logic like volume based triggers based off the bid / ask rather the LTP and entering your limit order with some logic that will go in passive while monitoring the market and go aggressive if the market starts to move away.
I agree with you Patrick, if possible use some sort of smart logic to trigger the stop. By the way, does TT offer access to cash FX or is it just for futures? Thanks