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Direct MessagesDate/Time: Sun, 19 May 2024 11:06:09 +0000
Post From: Attached stop order turns into stop limit order
| [2020-07-18 01:52:47] |
| ondafringe - Posts: 248 |
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Based on my understanding: If you're trading CME or ICE products, you need to be aware of the "Stop with Protection" Rule. For CME, trading ES/MES, the exchange adds a Stop-Limit order 3 points out from your normal Stop. Your normal Stop functions as expected; however, in a fast moving market, or a sudden, multi-point gap against your position that jumps, or blows through, your normal Stop... AND also jumps, blows through, the CME's Stop-Limit.. you may NOT be Stopped out of your trade at all. Should that happen, the Stop-Limit becomes a Buy (or Sell)-Limit 3 points out from where your normal Stop was placed. If the market bounces back quickly, once the price recovers to the Buy (or Sell)-Limit mark, you will then be Stopped out of your position and will suffer an additional 3 points of loss on top of what you would have lost based on your normal Stop... unless you cancel the Buy (or Sell)-Limit order before it is hit, and thereby remain in your position as though nothing had happened (double-check me on that). However, if the market does not bounce back immediately, you will still have an open position. And if the market continues to run against you, you will continue to accumulate additional losses well beyond where your normal Stop had been placed. Therefore it is IMPERATIVE for you to monitor your position closely ESPECIALLY during times of extreme volatility and/or very low liquidity (like overnight) because those are the times when this scenario could easily occur. Should this scenario occur, you will have to decide whether to wait it out in hopes the market recovers to near the Buy (or Sell)-Limit price, where you would then have the option to cancel the Bur (or Sell)-Limit order and remain in the position like nothing happened... or if you don't think the market will recover, manually close your position and take the extreme loss. During normal market hours, the odds of the above scenario happening are greatly reduced, but not eliminated, and your normal Stop would probably function as expected. Hopefully, I didn't garble all that up! :) Date Time Of Last Edit: 2020-07-18 02:01:06
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