Intraday Trading : Notes on Order Types
This page last changed on Jun 01, 2008 by iank@bearcave.com.

  • Limit order (LMT)

    A Limit order is an order to buy or sell a contract at a specified price. Use of a Limit order helps ensure that the customer will not receive an execution at a price less favorable than the limit price. Use of a Limit order, however, does not guarantee an execution.

    • A buy limit order for IBM at $125 will buy shares of IBM at $125 or less.
    • A sell limit order for IBM at $125 will sell shares of IBM for $125 or more.
    • A limit order must have a Time in Force (TIF) value

  • Market Order (MKT)

    A market order is an order to buy or sell an asset at the bid or offer price currently available in the marketplace. When you submit a market order, you have no guarantee that the order will execute at any specific price.

  • Stop Order (STP)

    A Stop order becomes a market order to buy or sell securities or commodities once the specified stop price is attained or penetrated. A Stop order is not guaranteed a specific execution price and may execute significantly away from its stop price. A Sell Stop order is always placed below the current market price of the security or commodity. It is typically used to limit a loss or protect a profit on a long stock position. A Buy Stop order is always placed above the current market price. It is typically used to limit a loss or help protect a profit on a short sale. Some exchanges natively accept and process Stop orders according to the standard industry definition of the term. For those exchanges that do not natively execute stop orders, IB simulates such stop orders with the following default triggers:

    Sell Simulated Stop Orders become market orders when the last traded price is less than or equal to the stop price. Additional sell stop order protection is provided for NASDAQ stocks and US Equity Options which are only triggered after two offer prices are less than or equal to the stop price.

    Buy Simulated Stop Orders become market orders when the last traded price is greater than or equal to the stop price. Additional buy stop order protection is provided for NASDAQ stocks and US Equity Options which are only triggered after two bid prices are greater than or equal to the stop price.

    You have purchased 100 shares of XYZ for $50.00/share. You want to limit possible loss on this stock, so you create a stop order to sell 100 shares of XYZ with the stop price set to $46.00. If the price of your stock falls to $46.00 or below, your stop order is activated and a sell market order for 100 shares XYZ is transmitted.

    • Enter the Stop Election price in the Aux. Price field.

  • Stop Limit Order (STPLMT)

    A STOP-LIMIT order is similar to a stop order in that a stop price will activate the order. However, once activated, the stop-limit order becomes a buy limit or sell limit order and can only be executed at a specific price or better. It is a combination of both the stop order and the limit order.

    A STOP-LIMIT order eliminates the risk of a stop order where the investor is not guaranteed an execution price, but exposes the investor to the risk that the order may never be filled even though the stop price has been reached. The investor could "miss the market" in the security or commodity altogether.

    You have purchased 100 shares of XYZ for $50.00/share. You want to limit possible loss on this stock, so you create a stop limit order to sell 100 shares of XYZ with the stop price set to $46.00 and the limit price set to 45.98. If the price of your stock falls to $46.00, your order is activated and a limit order to sell 100 shares of XYZ is transmitted.

    • Enter the Limit price in the Lmt Price field.
    • Enter the Stop Election price in the Aux. Price field.

  • Limit if Touched (LIT)

    A Limit if Touched is an order to buy (or sell) a contract at a specified price or better, below (or above) the market. This order is held in the system until the trigger price is touched. An LIT order is similar to a stop limit order, except that an LIT sell order is placed above the current market price, and a stop limit sell order is placed below.
    The order does not appear in the market until the limit price is touched, so the limit order does not show up in the order book. Presumably this provides a way for the trader to hide intent, which would otherwise appear in the order book.

    Stock XYZ shows an asking price of 24.50. You decide to buy 100 shares, but you don't want to pay more than 24.35 and you don't want to enter the market until the price drops to 24.40. You click the Ask price to create a BUY order, and select LIT in the Type field to specify a limit if touched order. In the Lmt. Price field, you enter your limit price of 24.35. In the Aux. Price field, you enter the trigger price of 24.40, and submit the order. Your order will remain in the system until the trigger price is touched, and will than be submitted as a limit order. It will only execute at 24.35 or better. If nobody is willing to sell for that price, your order will not execute.

    • In the Lmt Price field, enter the price at which you want the order to execute.
    • In the Aux. Price field, enter the "touched" price to trigger the order.

  • Market if Touched (MIT)

    A Market if Touched (MIT) is an order to buy (or sell) a contract below (or above) the market. This order is held in the system until the trigger price is touched, and is then submitted as a market order. An MIT order is similar to a stop order, except that an MIT sell order is placed above the current market price, and a stop sell order is placed below.

    Stock XYZ shows an asking price of 24.50. You decide to buy 100 shares, but you don't want to enter the market until the price drops to 24.40. You click the Ask price to create a BUY order, and select MIT in the Type field to specify a Market if Touched order. In the Aux. Price field, you enter the trigger price of 24.40, and submit the order. Your order will remain in the system until the trigger price is touched, and will than be submitted as a market order.

    • In the Aux. Price field, enter the "touched" price to trigger the order.

  • Trailing Stop Order (TRAIL)

    A trailing stop sell order sets the initial stop price at a fixed amount below the market price. As the market price rises, the stop price rises by the trailing amount, but if the stock price falls, the stop price remains the same. When the stop price is hit, a market order is submitted. Reverse this for a buy trailing stop order. This strategy may allow an investor to limit the maximum possible loss without limiting possible gain.

    • Enter a value in the Trailing Amt field. This is the amount is used to calculate the initial Stop Price, by which you want the limit price to trail the stop price. To change the absolute value to a percent of the best bid/ask, click in the field to initiate a dropdown arrow, and then choose Amt or %.
    • Stop Price - This field is optional. By default, the initial Stop Price is calculated as: market price - trailing amount. You can modify the stop price, but if it is lower than the calculated value, it will be discarded when the order is submitted. Note that the value you enter may display in the Stop Price field even if it is not used.
    • Limit Price - this value defaults to the current best bid/ask. The limit price will move with the trailing stop price based on the delta between the two prices (initial stop price - initial limit price = limit delta). If the limit price and stop price are equivalent, they will move together with a zero delta.

  • Trailing Stop Limit Order (TRAIL LIMIT)

    A trailing stop limit order is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain. A SELL trailing stop limit moves with the market price, and continually recalculates the stop trigger price at a fixed amount below the market price, based on the user-defined "trailing" amount. The limit order price is also continually recalculated based on the limit offset. As the market price rises, both the stop price and the limit price rise by the trail amount and limit offset respectively, but if the stock price falls, the stop price remains unchanged, and when the stop price is hit a limit order is submitted at the last calculated limit price. A "Buy" trailing stop limit order is the mirror image of a sell trailing stop limit, and is generally used in falling markets.

    You're long 100 shares of XYZ with a current market price of $10.00. You set up a trailing stop limit sell order with these parameters:

    Trail Amt = $.15
Stop price = $9.85
Limit Offset = $.10
Limit price = $9.75 (calculated using stop price - limit offset)


    The market price rises to $12.00; your trailing stop price rises with the market price to $11.85, and your limit price is recalculated to $11.75. Now the market price drops to $11.90 - your stop trigger price remains $11.85. Again the market price drops, this time to $11.80, which penetrates your stop price. The order triggers and your sell limit order is submitted at the last calculated limit price of $11.75.

    The Trailing Stop Limit order uses four components: Stop price, Trail amount, Limit price, and Limit Offset.

    • Aux Price (Trailing Amt) - This value is subtracted from the bid price to continually recalculate the stop price, if the market price rises. Use the dropdown to choose Amt or %. The trailing percent is calculated off the current best bid/ask. Note that you can define a default Trailing Amount in the Order Defaults Default Order Offset Amounts area.
    • Stop Price - You must enter an initial stop price. Unlike a trailing stop order, the initial stop price is not automatically calculated by TWS when you transmit the order, since the stop price is needed to calculate the limit price or limit offset. The stop price is continually recalculated when the market price rises. If the initial stop price is higher than the (market price - trail amount) it will not be modified.
    • Limit Price OR Limit Offset - The limit order piece of the trailing stop limit is submitted once the stop price is penetrated. While the market price and stop price continue to rise, the limit price is also recalculated (with an optional offset) and moves with the stop price. If you want to specify a limit offset amount, enter it in the Lmt Offset field. when the order is submitted, this value is subtracted from the stop price to calculate the limit price. If you want to enter a limit price, when the order is submitted the limit price is subtracted from the Stop price to calculate the Limit Offset. If the limit price and stop price are equivalent, they will move together with no offset.