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A stop-limit order is one order, not two (don't let the fact that it has
two prices confuse you)!
Suppose you want to get long on a breakout above a recent high spike, then
you would place a Buy Stop-Limit order above the market. Once the stop
price is touched, the order instantly becomes a limit order at the limit
price. By specifying the same limit price and stop price, you guarantee
that no slippage can occur. This order is a bit like entering a stop order
....but one where you pre-define what slippage, if any, you are prepared to
accept.
STOP-LIMIT ORDER: becomes a limit order when the the stop price is touched
STOP ORDER: becomes a market order when the stop price is touched
The downside to a stop-limit order (where the limit and stop price are the
same) is that the market blasts right through the stop price leaving you
unfilled. The order will still remain active: it just sits there as a
plain limit order until you cancel it. When you use a stop-limit order,
you are effectively saying "I only want the trade at X price or I don't
want the trade". By contrast a plain stop order which becomes a market
order would have filled you somewhere. I have seen a stop-limit order in
the NQ go unfilled but it is very rare. My preference for zero slippage on
entry makes the use of stop-limits a great tool for initiating a new
trade. For stop-loss orders, you need to guarantee that you are "out"
which means that a plain stop order is the best one to use.
S.
At 02:52 AM 11/19/2001 -0800, you wrote:
>If you enter an order like that what stops you from being stopped
>out about 1 second after you get filled?
>Doesn't your stop become a market order as soon as you are filled?
>
>NS
>
>
>SC> Right! e.g. Buy 1 NQ 1608.50 stop 1608.50 limit.
>SC> Works best only with online systems where the order is sent to rest on
>CME
>SC> servers, not held on broker's local servers (where the chance of not
>being
>SC> filled increases due to time lag in execution e.g. Interactive Brokers).
>SC> S.
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