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Duration: 4:00

Level: Beginner

A Trailing Stop Limit order is available for U.S and certain Non-US Products on the Pro platform. Accessible through both Mosaic, Classic TWS, and Mobile.

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Study Notes:

The Trailing Stop Limit orders works with U.S equities, options, futures, FOPS, Warrants as well as Forex and certain non-US products.

A trailing stop limit order is designed to allow the investor to set a limit on the maximum possible loss without setting a limit on the maximum possible gain.

It differs from a Trailing Stop order since the order becomes a limit order when the stop price is touched versus a market order.

For example, a sell trailing stop limit order sets the stop price at a fixed amount below the market price with an attached “trailing” amount. As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price doesn’t change, and a limit order is submitted when the stop price is hit.

We will now enter a trailing stop limit buy order in the Mosaic Order Entry Panel.

  • First, enter the symbol in the order entry panel and choose Buy and the quantity.
  • In the order type drop down box scroll down and select “Trail Limit”.
  • This will change the price box to show LMT and you will also now see the STP and Trail boxes next to it.
  • You can set the Trail to be either a dollar amount or a % of the current price.
  • The trailing price is based on the last traded price at the time of the order and tracks it throughout the lifetime of the order.
  • We will set the Trail to $1.05 by clicking on the price and scrolling up to 1.05.
  • Now enter a stop price above the current ask price.
  • Remember with a trailing stop limit the stop price will adjust accordingly if the market goes in your favor but will never adjust to cause more than the maximum possible loss you initially define.
  • We will also set the Limit price.
  • Once the limit price is set, the limit offset is calculated by the difference between the Stop price and the limit price, if the stock moves in your favor a limit offset be used to determine the new limit price once the stop price is triggered.

 

For example, if the last traded price is $15, you set the trail to $1 and the STP to $13 and the limit to $12.50, 50 cents below the stop price, the stock then rises to $17 your new STP price will be $16, and the order will be triggered if the stock price falls to $16 with a limit price of $14.50. If, however, the stock price doesn’t improve from $15 and starts to fall, a stop will be reached at $13 and the limit order of $12.50 will be activated.

Now that the order is set, click submit and the order confirmation window will appear summarizing the order and the inputs you selected.

Click Transmit and the order will populate the Activity panel and show TRAIL LIMIT in the Type data column.

You can also track the stop price by adding the “Stop Price” data column, the Trailing amount by adding the “Aux. Price” data column, and the limit offset by adding the “LMT. Offset” data column to the Activity Panel order tab by clicking on the gear icon in the top right-hand corner.

The Trailing Stop Limit order is a great way for the investor to set a limit on loss using a limit order  without potentially limiting possible profit.

Additional Links:

Trailing Stop Limit


Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Order Types / TWS

The order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock in a profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but not both. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in the marketplace.

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