Stop Orders: Triggers, Execution Prices, and Conditional Order Types
Summary
A stop order activates when the market reaches a trader-set trigger price, after which it submits an order that may have a separate execution price. The document explains how take-profit and stop-loss orders can be used to close positions, and how stop orders can also set entry conditions. Its Bitcoin examples show that placing an execution price beyond the trigger may improve fill probability when prices move quickly, while also creating a tradeoff between execution and price control.
It also describes several exchange-specific features: an OCO order pairs take-profit and stop-loss conditions so one cancels the other; a trigger order does not reserve margin or positions and can fail under limits; a position stop applies conditions to a specific amount; and TP/SL settings can be attached to market or limit orders. These features depend on platform rules and market conditions. Trigger orders may fail, stop orders may not fill as intended, and the article gives no quantitative evidence about slippage or execution rates. Traders should distinguish the trigger from the eventual fill price.
Key ideas
- A stop order activates after the market reaches a predefined trigger price.
- The execution price may differ from the trigger, affecting the likelihood and quality of a fill.
- OCO orders link take-profit and stop-loss conditions so execution of one cancels the other.
- Trigger orders may leave margin and positions available, but can fail due to trading limits.
- Position-specific stops and TP/SL settings attached to entry orders provide additional order controls.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.