In this video we will walk through how to enter an order using the Trailing Stop order type. The Trailing Stop orders works with U.S equities, options, futures, FOPS, Warrants as well as Forex and certain and certain non-US products. A trailing stop 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.
For example, a sell trailing stop 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 market order is submitted when the stop price is hit.
We will now enter a trailing stop sell order in the Mosaic Order Entry Panel.
- First, enter the symbol in the order entry panel and choose Sell and the quantity.
- In the order type drop down box scroll down and select “Trail”.
- This will change the price box to show STP and you will also now see the Trail box 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 $0.95 by clicking on the price and scrolling down to 0.95. You may choose to enter a stop price or leave it blank.
- If you leave it blank the Stop or trigger price will automatically be set to the last traded price minus the trail amount.
- Remember with a trailing stop 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.
For example, if the last traded price is $15, you set the trail to $1 and the STP to $13, 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. If, however, the stock price doesn’t improve from $15 and starts to fall, a stop will be reached at $13.
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 in the Type data column.
You can also track the stop price by adding the “Stop Price” data column and the Trailing amount by adding the “Aux. Price” to the Activity Panel order tab by clicking on the gear icon in the top right-hand corner.
The Trailing Stop order is a great way for the investor to set a limit on loss without potentially limiting possible profit.
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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.