Important Characteristics and Risks of Using Stop Orders
A Stop Order - i.e., a Stop (Market) Order - is an instruction to buy or sell at the market price once your trigger ("stop") price is reached. Please note that a Stop Order is not guaranteed a specific execution price and may execute significantly away from its stop price, especially in volatile and/or illiquid markets.
Stop Orders may be triggered by a sharp move in price that might be temporary. If your Stop Order is triggered under these circumstances, you may buy or sell at an undesirable price. Sell Stop Orders may make price declines worse during times of extreme volatility. If triggered during a sharp price decline, a Sell Stop Order also is more likely to result in an execution well below the stop price.
Placing a limit price on a Stop Order may help manage some of these risks. A Stop Order with a limit price - a Stop (Limit) Order - becomes a limit order when the stock reaches the stop price. By using a Stop (Limit) Order instead of a regular Stop Order, you will receive more certainty regarding the execution price, but there is the possibility that your order will not be executed at all if your limit price is not available in the market when the order is triggered.
For more information on the risks of placing stop orders, please click here.
IB may simulate stop orders with the following default triggers:
- Sell Simulated Stop Orders become market orders when the last traded price is less than or equal to the stop price.
- Buy Simulated Stop Orders become market orders when the last traded price is greater than or equal to the stop price.
IB may simulate market orders on exchanges. For details on market order handling using simulated orders, click here.
Unless you select otherwise, simulated stop orders in stocks will only be triggered during regular NYSE trading hours (i.e., 9:30 a.m. to 4 p.m. EST, Monday to Friday). IB's default trigger methodology also contains additional conditions which can vary depending on the type of product traded. For a detailed description of IB's trigger methodology, including information on how to modify the default trigger methodology, see the Trigger Method topic in the TWS User's Guide.
With the exception of single stock futures, simulated stop orders in U.S. futures contracts will only be triggered during regular trading hours unless you select otherwise. Regular trading hours can be determined by mousing over the clock in the time in force field or the contract description window.
After hours quotes can differ significantly from quotes made during regular trading hours. Stop orders configured to trigger outside of regular NYSE trading hours with a trigger method set to Bid/Ask may trigger in illiquid markets and/or on quotes with wide bid/ask spreads.
Native stop orders sent to IDEM are only filled up to the quantity available at the exchange. Any unfilled stop order quantity will be cancelled.
For special notes and details on U.S. futures stop and stop limit orders, click here.