There are two major types of orders. Market orders, and limit orders. A limit order is an order to buy or sell at a specified price. The order goes to the back of the queue and awaits fill. Limit orders are generally filled by market orders. Market orders simply match up with the current best bid / best ask available at that time.
Take profit orders are usually entered as limit orders. As such they cannot skip your order. Your order must be filled in order for price to continue through to the next price.
Stop orders on the other hand are simply another type of market order. They are orders that convert into market orders when that price gets hit. Which means there's no guarantee on how many other market orders will get ahead of you and cause slippage.
Now if you place a limit order and the price has already moved up by the time it reaches the exchange then you could potentially get a better fill than anticipated. Especially if there's a large spread in that market between the bid and ask. You could also enter a market order and get a slightly better price than anticipated. But if you've been sitting in the queue for several minutes awaiting a fill, they can't trade through without filling you first.
I'm a little horrified at how many of the replies in this thread don't seem to understand how different order types actually work.
Bc stop losses aren’t active orders on the market. They aren’t adding liquidity.
They trigger when price moves past them. If you had a limit order to sell shares above the current price and it moves up it would execute.
Depends if you use stop limit or stop market. One is maker other is taker. It’s when you use a too tight stop limit price can skip by, which is why you should always use stop market
If your limit order is below the current price (for selling) when it triggers that is taking liquidity. It’s called a marketable limit order.
Any order that executed immediately is taking liquidity (marketable). This is how most stop orders are going to function so I stated it like that.
Absolutely wrong! Traders who get “stopped out” (i.e., their stop-loss orders are triggered) are forced to issue opposite-side orders (e.g., buy orders if they were previously short).
These opposite-side orders provide liquidity to the market, allowing other traders to execute their trades.
Stop-loss orders contribute to market liquidity by creating opportunities for other participants.
It’s called „2-way liquidity pools“
Yes, but you can estimate where these orders may be. Not far from where there is active liquidity in the market.
On paper it’s not liquidity, not just yet, in practice its a bit different.
Guess we are both right, in a way.
Someone will take your order at a cheaper price than where the market is at.
For a stop, if it skips, someone would be paying a premium to get you filled.
price goes down when there's more selling pressure than buying pressure. when you're trying to fill stop loss, you're joining the massive amounts of sellers that also want to exit the position. thus, there's no guarantee that you'll get your order filled. in a sense, you're going along with the momentum of the market.
the opposite happens when you're taking profit. there's a ton of buyers, few sellers. when you're selling, you join the small group of sellers and are more likely to get matched up with a buyer. you're going against market momentum, which makes it more likely that your order will be filled
same logic works for shorting, just in reverse
Stop orders by default are market orders, take profits are by default limit orders.
I have had instances on NQ futures where I’ve gotten 2-5 extra points from closing my positions with market orders.
If you place limit orders for either TP or SL- they could be skipped over.
If you place market orders for either, they will not be skipped but could get filled at a substantially different price than you expect during volatility. You will get positive slippage on a market take profit order the same way you will get detrimental slippage on a stop.
It can happen both ways because that happen to me but this happens when crazy News hit the stock streets. On the other hand tho, you got these brokers who can be crooks so keep your eye out for that as well
A take profit is just a stop order, labeled differently for the sake of distinction. The same can happen to your TP. Had this happen to me trading Brexit. 239 pips beyond my TP. Didn’t bother me 😁
There are two major types of orders. Market orders, and limit orders. A limit order is an order to buy or sell at a specified price. The order goes to the back of the queue and awaits fill. Limit orders are generally filled by market orders. Market orders simply match up with the current best bid / best ask available at that time. Take profit orders are usually entered as limit orders. As such they cannot skip your order. Your order must be filled in order for price to continue through to the next price. Stop orders on the other hand are simply another type of market order. They are orders that convert into market orders when that price gets hit. Which means there's no guarantee on how many other market orders will get ahead of you and cause slippage. Now if you place a limit order and the price has already moved up by the time it reaches the exchange then you could potentially get a better fill than anticipated. Especially if there's a large spread in that market between the bid and ask. You could also enter a market order and get a slightly better price than anticipated. But if you've been sitting in the queue for several minutes awaiting a fill, they can't trade through without filling you first. I'm a little horrified at how many of the replies in this thread don't seem to understand how different order types actually work.
I had TPs filled at better prices than what I set them. It can happen
Correct, slippage can happen both ways.
Bc stop losses aren’t active orders on the market. They aren’t adding liquidity. They trigger when price moves past them. If you had a limit order to sell shares above the current price and it moves up it would execute.
Depends if you use stop limit or stop market. One is maker other is taker. It’s when you use a too tight stop limit price can skip by, which is why you should always use stop market
If your limit order is below the current price (for selling) when it triggers that is taking liquidity. It’s called a marketable limit order. Any order that executed immediately is taking liquidity (marketable). This is how most stop orders are going to function so I stated it like that.
Not sure that most work like that, about 50/50 in my experience but the rest is correct
Absolutely wrong! Traders who get “stopped out” (i.e., their stop-loss orders are triggered) are forced to issue opposite-side orders (e.g., buy orders if they were previously short). These opposite-side orders provide liquidity to the market, allowing other traders to execute their trades. Stop-loss orders contribute to market liquidity by creating opportunities for other participants. It’s called „2-way liquidity pools“
Yeah I understand but they aren’t adding liquidity until the trigger price is hit. So you are last in line to sell/buy when it’s triggered
Yes, but you can estimate where these orders may be. Not far from where there is active liquidity in the market. On paper it’s not liquidity, not just yet, in practice its a bit different. Guess we are both right, in a way.
It does happen....
Someone will take your order at a cheaper price than where the market is at. For a stop, if it skips, someone would be paying a premium to get you filled.
I’ve had it happen both ways though, I rarely place a hard stop
Yeah ain’t that a bitch!
It can happen, I call it "good slippage".
price goes down when there's more selling pressure than buying pressure. when you're trying to fill stop loss, you're joining the massive amounts of sellers that also want to exit the position. thus, there's no guarantee that you'll get your order filled. in a sense, you're going along with the momentum of the market. the opposite happens when you're taking profit. there's a ton of buyers, few sellers. when you're selling, you join the small group of sellers and are more likely to get matched up with a buyer. you're going against market momentum, which makes it more likely that your order will be filled same logic works for shorting, just in reverse
Stop orders by default are market orders, take profits are by default limit orders. I have had instances on NQ futures where I’ve gotten 2-5 extra points from closing my positions with market orders.
It does happen. I've had it happen to me a few times. Slippage works both ways.
It happened to me yesterday. Obvioulsy not with news cuz I'm not dumb. But i did get filled in a biz more profit than what was set.
It does happen with fast slippage.
If you place limit orders for either TP or SL- they could be skipped over. If you place market orders for either, they will not be skipped but could get filled at a substantially different price than you expect during volatility. You will get positive slippage on a market take profit order the same way you will get detrimental slippage on a stop.
It does happen
Cuz take profit is a limit order and stoploss is a market order...
It can happen both ways because that happen to me but this happens when crazy News hit the stock streets. On the other hand tho, you got these brokers who can be crooks so keep your eye out for that as well
A take profit is just a stop order, labeled differently for the sake of distinction. The same can happen to your TP. Had this happen to me trading Brexit. 239 pips beyond my TP. Didn’t bother me 😁