Limit and Stop orders are orders which are set on an open position, predefining the closing rate of the position, in order to take profit or stop a loss of funds in an open position.
The importance of implementing the limit and stop orders as a risk management tool, for one there is no need to enter your account daily to monitor how your stock/trade is doing. It is greatly handy when you cannot be in front of your platform for extended periods of time.
It would be virtually impossible for a trader to spend 24 hours in front of his computer watching his trades move tick by tick, however stop and limit orders will come in great use when there are major market events that can happen in an instant.
These events generally take all investors by surprise, however, having your trades safely in check will either lock in your set profit or close your position should the event take your trades in a turn for the worst.
In the event that you are on your platform when a major event strikes the economy, the limit or stop order will be executed faster than any manual action.
Limit Orders
Limit orders are orders set on an open position which will close a trade at a predefined rate, which will ensure the trader will keep his profit. These orders are also known as “take profit” orders.
Stop Loss Orders
Stop loss orders are orders set on an open position which will close a trade at a predefined rate which is less favourable than the current market price. The purpose of using a Stop Loss order is to set a limit to possible losses on a certain trade.
Trailing Stop Orders
Trailing stop orders are orders set on an open position. This type of order is designed to allow traders to set a stop loss point at a fixed margin from the market price. So, if the price moves in favour of the open position, the stop point will change in accordance, keeping the same margin from between the stop loss and market price.
How to Use Limit and Stop Orders?
Limit Order
- Locate the position in the Open Position window, and right-click on it. Choose Limit and set your preferences for the order.
- In the desired position row, choose the limit column and click on it. Then, set your preferences for the limit order.
- On the trade tab, choose limit. Click on the desired position in the Set Limit Order window. Then, set your preferences for the limit order.
Setting Limits and Stops with Market and Entry Orders
When setting a Market Order or Entry Order, you can set a limit and stop or trailing stop orders in advance. Check the Set Predefined Stop/Limit option and set your preferences.
Where do I see my order?
Your order will appear in two places:
- In the Orders window.
- In the Open Positions window, in the row of the position on which the order was set on, in the designated column for your order.
Disclaimer:
AVA guarantees all Limit orders will be executed at the specified rate, not a better rate. AVA does not guarantee it Stop Losses and Trailing Stop. If there is a sharp market move, and the current price of an instrument breaks through the client’s Stop Loss or Trailing Stop rate, the order will be executed at the next available price.