In this lesson, we’ll walk you through how to set up a Stop and Stop Limit order using TWS Mosaic.
- We’ll define the objective of the Stop and Stop Limit order type
- Show you how to create a Stop order in TWS Mosaic
- Show you where you can locate Stop orders within the Activity panel
TWS Mosaic Stop and Stop Limit orders
Typically, Stop orders help investors get out of an existing position. They are intended to either lock in profits or limit losses. Alternatively, a Stop order can be created to force you, the investor, into a fresh position when a specified price is reached. In this case, you have determined that you either want to go long if prices rise above a specific price or establish a new short position should prices fall below a specified threshold.
For both Stop and Stop Limit orders, the determined stop price serves as a trigger, which will activate the order when penetrated. You should *note, however, that stop orders are not guaranteed to execute.
So, what is the difference between the Stop and Stop Limit order types?
For one, a Stop order becomes marketable and is intended to fill – regardless of price – once the determined trigger price is pierced.
It does not have a specific execution price and may execute significantly away from its Stop price. In that regard, it is not possible to estimate the impact of executing away from the trigger, or Stop price, until the trade has filled.
Meanwhile, a Stop Limit order has the additional component of a limit price associated with the stop price trigger.
While this added element eliminates the price risk associated with the Stop order, it introduces the risk that the order may not fill at all, and that the investor may ‘miss the market’ altogether.
Creating a Stop order in TWS Mosaic
Let’s see how we can create them in TWS.
We’ll focus on the Stop Order first, and we’ll use – for illustrative purposes – a stock ticker in my portfolio with an existing long position.
Once we’ve selected the stock, click on the Sell button. I see that my position in this stock is 100 shares – and I’m going to choose to sell this amount from the Quantity field. Since I want this to be a Stop order, I’m going to specify this using the Order Type dropdown. The menu selection for Stop here is STP. If you don’t see it listed, click on the expand arrow at the bottom of the list.
Now, I’m selling 100 shares of my stock as a Stop Order – that much we’ve established – but *remember, a Stop order becomes marketable and is intended to fill – regardless of price – once the determined trigger price is penetrated. So, we’ll need to determine what that trigger price is.
Since we’re selling these shares, we’ll want to set a price below the prevailing trading price of the security – this is the price at which you want the order to become active. Let’s enter that price in the Price Input field.
When this price is reached, the system will automatically turn the order into a market order and sell until filled.
At this point, you may want to consider how long you want the order to remain open for.
If you leave Day order as the default, the system will cancel the order at the end of the daily session if not triggered; however, if you want, you can also change this setting to GTC, or ‘good-till-cancelled,’ from the time-in-force menu.
Okay, let’s review the order:
I‘m selling 100 shares of my stock as a Stop order, with a set trigger price below the prevailing trading price, and I’ve left the Day order in place. Since I’m satisfied with these details, I’ll go ahead and hit Submit. You’ll see that an Order Preview is generated when I do this. I’m just going to review everything again and am now ready to Transmit the order to the market.
And once I transmit my order, I’ll see it appear on the Orders tab in the Activity window.
Creating a Stop Limit order in TWS Mosaic
Now that we know how to create a Stop order in Mosaic – how about a Stop Limit order?
For the Stop Limit order, you’ll see that the basic order entry is the same, however this time you may want to close a position showing open profits or set a maximum loss on a losing trade.
Let’s go through some steps, we’ll select a stock, click on the Sell button, and select the Position size from the Quantity input field.
Now, when selecting from the Order Type dropdown menu, select the Limit version of the Stop order, which is displayed as STP LMT.
The Order Entry panel now displays the additional input field for Limit as well as the Stop input field we saw in the previous example.
Enter the price, below the prevailing trading price of the security, at which you want the order to become active. If reached, your stop order becomes an order to sell.
However, rather than becoming a market order, you may enter a Limit price below which the order will not execute. In the Limit field, enter this value.
*Remember to change the time-in-force selection if necessary.
Once I review the details and am satisfied, I’ll go ahead and submit the order. TWS will follow with an Order Confirmation, and I’ll ensure here that all the details of my order are as they should be – and if they are, I’ll transmit it.
Locating Stop orders within the Activity panel
Just like we saw with the Stop order, you will see this Stop Limit order appear in the Activity panel below.
Lastly, you do not have to have an open position to use Stop or Stop Limit orders, you may establish fresh long positions using a Buy Stop or new short positions using Sell Stop or Stop Limit orders.
Now that you know how to create a Stop and Stop Limit order in Mosaic, let’s turn our attention to the next lesson on order types in Traders’ Academy.
Hello,
I would like to clarify whether purchase BRACKET ORDERS on TWS can execute a STOP LOSS sale order outside of Regular Trading Hours (RTH). Is it possible to set up a STOP LOSS order that executes during extended trading hours, or are there specific restrictions regarding this?
Could you also advise on best practices or alternatives available for risk management outside of RTH?
Thank you in advance for your assistance.
Best regards,
Jean-Pierre Sablier
Hello, thank you for reaching out. You can set up stop orders on individual positions on your account, but they will only trigger during regular trading hours for that product. For products that support trading outside of regular hours, you can enable the Extended Hours feature just below the Time in Force section of the order ticket. Extended Hours is only available for Limit orders.
Please view this User Guide for more information on our Order Types in TWS:
https://www.ibkrguides.com/traderworkstation/order-types.htm?Highlight=extended%20hours
We hope this helps!