How To Set A Trailing Stop On Thinkorswim

Advanced Stock Order Types to Fine-Melody Your Market Trades

January 8, 2022 5 min read

5 min read

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Key Takeaways

Advanced stock orders are designed for special trading circumstances that require actress specifications
Nearly advanced orders are either time-based (durational orders) or status-based (conditional orders)
Advanced club types can be useful tools for fine-tuning your order entries and exits

If you're an experienced trader, one whose strategies have grown toward the more sophisticated side of things, then your trade entries and exits might require a scrap of extra nuance. In many cases, bones stock order types tin still cover most of your trade execution needs. Simply if your orders crave a bit more fine-tuning, at that place are a host of avant-garde stock society types at your disposal.

Equally with the more bones variety of stock orders, you probably want to know these advanced order types really well and so you lot can match them to the appropriate context and avoid errors that could be risky or costly. Annotation that some of the gild types described hither straddle the "basic" to "advanced" category—so y'all might want to familiarize yourself with all of them to better sympathise when and when not to employ them.

Before we get started, there are a couple of things to note. These avant-garde club types autumn into 2 categories: conditional orders and durational orders. Conditional means that an gild is to be filled nether specific weather condition or that the fill will trigger a condition. Durational means that an order must take place inside a specific time frame, or "time in force."

I-Cancels-Other Order

A one-cancels-other (OCO) gild is a conditional order in which two orders are placed, and one guild is canceled when the other order is filled. This may sound complicated, but information technology'southward fairly piece of cake to understand in context.

Suppose you purchase shares of a stock trading at $40. Your turn a profit target is thirty%, and yous don't want to lose more than than ten% value in your position.
Y'all might place an OCO lodge consisting of a sell limit ("take profit" gild) at $52 and a sell stop (often called a"stop-loss" social club) at $36.
If the stock's price reaches $52, your position will shut out at a profit and your sell stop volition immediately be canceled, removing the risk of inadvertently opening a brusque position should the stock refuse to merchandise over again at $36.

Bracket Order

Available in nigh trading platforms designed for agile traders, a subclass order will immediately place an OCO "accept turn a profit" and a stop lodge one time a position is opened.

If you enter a long position, a bracket club volition immediately place an OCO sell limit (accept profit) and sell finish.
If you lot enter a short position, a bracket order volition place an OCO buy limit (take profit) and buy stop.

Terminate Limit Order

A cease-limit order allows yous to define a price range for execution, specifying the price at which an order is to exist triggered and the limit price at which the order should exist executed. It essentially says: "I want to buy (sell) at cost X but not any college (lower) than price Y."

Suppose y'all're eyeing a stock that'southward trading at $120. You lot want to buy when the cost reaches $125, only not if it exceeds $130. And so yous identify a finish limit lodge—a buy terminate at $125 and a purchase limit at $130. Past doing this, your social club tin can get triggered at the lower (specified) price while preventing whatever orders from being triggered beyond your price limit. Then if the stock opens at a gap across $130, your order isn't filled until the cost falls back to $130 or below. For short sale positions, you'd do the contrary.

If you're using the thinkorswim® platform from TD Ameritrade, y'all can set up brackets with stop and stop limit orders when placing your initial trade. Under the Merchandise tab, select a stock, and cull Buy custom (or Sell custom) from the bill of fare (see figure 1).

Good 'Til Canceled (GTC) vs. Day Gild

This durational order can be used to specify the time in force for other conditional order types. It basically means: "Keep this society active until I cancel it." Orders that haven't been filled past the end of the solar day are ordinarily canceled once the marketplace closes. But if you want to go along a purchase order or sell social club in place until information technology'south filled, or however long your broker will allow yous to keep it agile (typically no more than than 90 days), this is when you might want to use a GTC order.

A Quick Notation on Time in Forcefulness

A bit of common sense: If yous're placing a conditional order blazon that involves two or more than orders, make sure that the time in forcefulness (TIF) for each order is identical. For example, if you're placing an OCO (one-cancels-other) gild, it wouldn't be good if the social club to be canceled immediately is a GTC (good 'til canceled) gild.

Also, don't misfile a day guild (which gets canceled at the terminate of the day) with a GTC order (which doesn't go canceled at the end of the twenty-four hours). You don't want to be surprised by a "mystery position" the post-obit day floating around in the negative return zone. In the thinkorswim platform, the TIF card is located to the right of the order type.

Trailing Stops

Trailing stops are not "orders" per se, merely they're a ways to automatically move or "trail" stops (basic terminate orders). Think of the trailing finish as a kind of exit plan.

Here's how it works. Allow'southward say you purchased shares of stock, and your entire position is at present in the turn a profit zone. What might you do with your stop? You can go out it in place. Yous can motility it upward to a more "break-fifty-fifty" level to avoid loss should the market place move confronting y'all. Or you can set information technology to "trail" your profitable position as it moves higher.

Suppose you lot set a abaft stop a specified distance below your current position.
If your position continues to move college, your trailing end too moves college.
If your position declines to match the price of your trailing stop, your stop lodge is triggered, endmost your position.

You lot're probably thinking, "Okay, but how far below my position should the trailing end follow?" At that place are many means to summate a trailing stop. If you lot're using the thinkorswim platform, y'all could pull up an club ticket and select from the bill of fare under the order type (see figure ii). The choices include bones order types too every bit trailing stops and stop limit orders.

Earlier implementing any of these order types, it'southward important to know a few more than things about stop orders. With a stop limit order, y'all risk missing the market birthday. In a fast-moving marketplace, it might be impossible to trigger the society at the stop toll, and then to execute it at the stop-limit price or better, so you lot might not have the protection you sought. A trailing terminate or stop loss order volition non guarantee an execution at or near the activation price. In one case activated, they compete with other incoming marketplace orders. And, of course, a limit order doesn't guarantee execution equally the market may never reach your limit price.

The Lesser Line

Avant-garde order types tin be useful tools for fine-tuning your order entries and exits. But you lot need to know what each is designed to accomplish. And equally with any trade thought or component yous're trying out for the get-go time, consider practicing outset in a faux environment such as the paperMoney® stock market simulator on the thinkorswim platform.

Archaic Corner:
A Few Social club Types Rarely Used past Retail Investors

Firsthand-or-Abolish (IOC) Order

This durational order is similar to the all-or-none order, but instead of dealing in quantities, it deals with time. Essentially, the IOC order says: "Requite me equally much of my order as possible within this specific time frame (usually a few seconds) and cancel all unfilled orders once that time has passed." You can specify the time in force for this type of club.

Suppose you lot want to buy 5,000 shares of stock, merely yous don't want to go filled at a broad range of prices. Or perchance volume is on the sparse side and you don't want to movement the market. You can place an IOC market or limit lodge for v seconds before the order window is closed. Yous might receive a partial fill up, say, 1,000 shares instead of 5,000. But you tin always echo the guild when prices over again achieve a favorable level.

Why this is rarely used: Unlike institutional investors who tin can trade at high levels of volume, about investors don't accept to worry virtually moving the markets. Arguably, a retail investor can move a highly illiquid market, such equally those for penny stocks. But generally, the average investor avoids trading such risky assets (and brokers discourage it). Hence, there'south not much need (or demand) for this type of gild.

All-or-None (AON) Order

Its name says information technology all: "Give me the entire quantity of shares I'm request for or don't give me any at all." An AON order ensures that yous won't become a partial make full. So if you order one,500 shares of a stock, you lot'll receive exactly that amount, as long equally there are enough shares at the time of the guild to fill your request.

Why this social club type is practically nonexistent: AON orders were commonly used amid those who traded penny stocks. Again, almost investors avoid penny stocks considering of their loftier risk profile, and most brokers prefer information technology that way, if only to reduce customer and broker risk. Hence, AON orders are generally absent from the guild menu.

Fill-or-Kill (FOK) Order

The FOK order is unique in that information technology's the just order blazon you don't desire to yell over the telephone to your broker when in a public setting, as people invariably become the wrong thought. Aside from this, the FOK lodge is like an all-or-zip (AON) club just with the time limit of an immediate-or-cancel (IOC) guild.

Confusing? It's not, really. The FOK order essentially means: "Fill my entire order inside the specified fourth dimension frame or kill the lodge." For example, suppose you want to buy exactly 500 shares of stock within the next 10 seconds. If the shares are available within that 10-second time frame, you'll get filled. If not, your social club will expire subsequently 10 seconds.

Why this society blazon is practically nonexistent: FOK orders, although nuanced with a bent toward accuracy, have enough conditionals to make them impractical. In other words, many traders terminate upwardly without a fill, so they switch to other order types to execute their trades. Over fourth dimension, traders have mostly used other lodge types, finer "killing" the fill-or-impale order through low need.

Desire to learn more than near basic stock order types? Spotter this short video:

Bones Stock Gild Types: Tools to Enter & Get out the Market

5:39

Michael Turvey

By Michael Turvey

Senior Manager - Institutional Trading Relationship, TD Ameritrade Institutional

Key Takeaways

Advanced stock orders are designed for special trading circumstances that require extra specifications
Near advanced orders are either time-based (durational orders) or status-based (conditional orders)
Advanced order types can exist useful tools for fine-tuning your order entries and exits

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