A Trailing Stop Limit order is designed to allow an investor to specify a limit on the maximum possible loss without setting a limit on the maximum possible gain. A "Sell" Trailing Stop Limit moves with the market price and continually recalculates the stop trigger price at a fixed amount below the market price based on the user-defined "trailing" amount. The limit order price is also continuously recalculated based on the limit offset. As the market price rises, both the stop price and the limit price will rise by the trail amount and limit offset respectively, but if the stock price falls, the stop price will remain unchanged. When the stop price is hit, a limit order will be submitted at the last calculated limit price. A "Buy" Trailing Stop Limit order is the mirror image of a sell Trailing Stop Limit, and is generally used in falling markets.
To send a Trailing Stop Limit order in Classic TWS:
- Use the Customize Layout followed by Order Columns feature to display the Stop Price and Limit Offset columns
- Click the Bid price to create a Sell order; click the Ask price to create a Buy order;
- Select TRAIL LIMIT as the order type
- Enter a Trailing Amount in the Trailing Amount field; this is the distance below the last traded price (for Sell Stop orders) at which the Stop is adjusted if the market rises
- Enter the Stop Price in the Stop Price field; here you must enter the initial Stop Price. Unlike a Trailing Stop order, the initial Stop Price is not automatically calculated by TWS when you transmit the order. This value is needed to calculate the Limit Price or Limit Offset
- Enter a Limit Price OR Limit Offset; the limit order piece of the Trailing Stop Limit is submitted once the Stop Price is penetrated. While the market price and Stop Price continue to fall, the Limit Price is also recalculated using the limit offset and moves with the Stop Price
- If you enter a Limit Offset, the Limit Price is calculated using (Stop Price - Limit Offset)
- If you enter a Limit Price, the Limit Offset is calculated using (Stop Price - Limit Price) when the order is submitted
- If the Limit Price and Stop Price are equivalent, they will move together with no offset.
- Select the appropriate time in force
- Hit Transmit (or T) to submit the order.
Additional Information
- Trailing Stop Limit orders page of the IBKR website.
- Trailing Stop Limit in the TWS Users' Guide.
- Trailing Stop Limit Study Notes