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Forum - Gurus Answer Questions    Gurus answer your questions about the art of trading.

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From: jcwade0129 (Rep: 0)Date: 07/17/2016 19:26
Forum: Gurus Answer Questions - Msg #549Thread #673854140 (Rec: 0)
I am a newbie, but have perhaps learned more than I realize. I just started paper-trading using the Interactive Brokers TWS platform and have found that using stop orders are a great way for me to enter a trade without being online continuously (I have a day job). Yet I feel that after the stop price is penetrated and my order converts to a market order and is thus executed, I am kinda back in manual mode ... at the mercy of the market bouncing the wrong direction OR going the right direction and losing out on some profits -- while I'm busy with my other life. Thus, I began using bracket attachment (child) orders to set STPs to get me out of the trade automatically if the trade starts going south and a LMT (not my choice ... the bracket drop-down only offers this) order if my target is reached. Btw, I have been exclusively selling (what I hope are) bearish stocks short.

That said, this is my question: I am at a loss about the difference between a STP order and a STP LIMIT (parent) order in the I.B. drop-down. As I stated above, I've been exclusively using the STP order type so far, but suspect that a STP LIMIT order may afford me added protection. Yet I'm getting conflicting advice from various sources. For a STP LIMIT, my platform demands two prices to be selected - the STP price and the LIMIT price. Since I've been using only STP orders so far to just get me into trades, the LIMIT price on a STP LIMIT order seems like just a 2nd threshold to cross. What benefit does this 2nd threshold provide? I read somewhere that a LIMIT price has to be hit precisely or the order will not be executed. Could it be that this 2nd threshold protects me from a volatile, plunging price that a simple STP order would not, since the STP order might get me into the trade at a much-lower price that very likely has no more profit potential?

Bottom line: Does the LIMIT price (and not just in a STP LIMIT order) have to be hit EXACTLY for the order to be filled ... or can a LIMIT price simply be penetrated and still grant me entrance to the trade? If the latter, what could the purpose of this 2nd (LIMIT price) threshold be?!

If someone wants to tackle my question, please answer within the context of selling a stock short. Otherwise, I may get easily confused.

NOTE: This message was originally posted on 2016-07-17 18:04:09 by the jcwade0129.

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