Stop and Limit Orders

Stop and Limit orders are orders to close a position when the market price reaches the price you specify in the order. Stop and limit orders can be added to a market order or to an entry order.

Stop Order

Stop order is an order to close a position at a specified price to prevent further losses if the market price doesn't move to your advantage. A stop order can only be set at a price less favorable than the current price. That is below the market price for buy positions and above the market price for sell positions.

For example, you buy EUR/USD at 1.4785(6) and want the position to close automatically if the market price moves 100 pips against you. In this case you should set a stop order at 1.4685(6).

Trailing Stop

A stop order can be trailing. Trailing stop orders are used for locking in the profit if the market price moves to trader's advantage. The order price automatically moves to your advantage each time the market price moves to your advantage by the value of the trailing step.

The trailing step specifies the move of the market price by which the order price should move. The trailing step can be set by a trader (fixed step) or by the trading system (dynamic step). The trailing step is expressed in pips.

For example, you buy EUR/USD at 1.4785(6) and add a 20-pip trailing stop order at 1.4765(6). Your trailing stop has a trailing step equal to 0.1 of a pip. Each time the market price moves up, your stop automatically moves up as well. Suppose the price of EUR/USD rises by 20.2 pips to 1.4805(8). Then your stop automatically moves up to 1.4785(8) locking in your profit. The stop price will continue to move up while the price of EUR/USD grows. If the price of EUR/USD moves down, the stop will remain at 1.4785(8). Once EUR/USD falls to 1.4785(8), your stop will be executed, and your position will be closed.

Limit Order

Limit order is an order to close a position at a specified price to lock in the profit if the market price moves to your advantage. A limit order can only be set at a price more favorable than the current price. That is above the market price for buy positions and below the market price for sell positions.

Stop order for buy position is placed below the current market price. Limit order is placed above the current market price.

Stop order for sell position is placed above the current market price. Limit order is placed below the current market price.

For example, you buy EUR/USD at 1.4785(6) and want the position to close automatically if the market price moves 100 pips in your favor. In this case you should set a limit order at 1.4885(6).

Stop and Limit Distance

The price of a stop or limit order can be set either directly, by specifying a price, or through a distance (offset) in pips from the market price.

When you specify the price through a distance, the system defines the price of a stop or limit order by adding the distance to either the open price of the related trade or entry order, or to the close price (the current market price) of the related trade or entry order. Which price will be used to calculate the stop or limit order price depends on the way you create the order:

• If you create a stop or limit order in FX Trading Station or Marketscope, the price for a stop order is calculated from the current close price and the price for a limit order is calculated from the position open price.
  For example, you create an entry order to buy EUR/USD at 1.4700 with a 50 pips stop and a 50 pips limit. When the market reaches the entry order price, the order is executed at 1.4700. The limit price will be 1.4750 (50 pips above 1.4700, the open/ask price). It will bring $50 profit. The stop price will be 1.4647 (50 pips below 1.4697, the close/bid price). It will bring $53 loss.
• If you create a stop or limit order through API, you can choose which price should be used to calculate a stop or limit order price.

Stop and limit orders with prices through distances are useful when you don't know an exact price at which a position will be opened but you want your stop or limit order to be placed at a particular distance from the price of the related order. Specifying prices through distances is also useful when you are trading with stops and limits which are close to the market price.

Stop and Limit Orders for US Based Accounts

Stop and Limit orders on individual trades for United States based accounts are not functional as they are not compliant with the National Futures Association (NFA) Compliance Rule 2-43 (b). To manage risks on these account, you can use OCO orders or ELS (Entry Limit Stop) orders.