IBITTERS,
1. What is a trailing stop order?
A trailing stop order is a type of stop order that tracks market prices for take-profit and stop-loss purposes. Its trigger price will vary with market fluctuations, and once triggered successfully, a market order will be placed. This order can help users dynamically lock in profits or minimize losses in volatile market conditions. Additionally, an activation price can be set to determine when the order is activated.
2. How to place a trailing stop order?
- Activation:
If the activation price = the latest price when the order is placed, then the trailing stop order will be activated immediately.
If the activation price > the latest price when the order is placed, then the trailing stop order won't be activated until the latest price ≥ the activation price.
If the activation price < the latest price when the order is placed, then the trailing stop order won't be activated until the latest price ≤ the activation price. - Trigger:
- Buy: Latest Price ≥ Trigger Price
- Sell: Latest Price ≤ Trigger Price
The calculation for the trigger price:
Buy: [Var.] lowest price + trail variance; [Percentage] lowest price* (1 + trail variance)
Sell: [Var.] highest price - trail variance; [Percentage] highest price* (1 - trail variance)
About Callback Rate
Callback rate is the percentage of movement in the opposite direction that you are willing to tolerate. The callback rate ranges from 0.1% to 10% by placing the rate manually in the “Callback Rate” field. For example, if a sell order has a callback rate of 5% and the historical high price is $50,000, then the current actual trigger price would be $50,000 * (1 - 5%) = $47,500.
About Quantity
The quantity refers to the amount of market order placed after the trailing stop order is triggered.
About Activation Price
Activation price is your desired price level that triggers the trailing stop order. If no activation price is set, the activation price will be the market price by default (either “Last Price” or “Mark Price”, subject to trigger types).
To place a buy trailing stop order, the activation price must be lower than the market price. Conversely, the activation price must be higher than the market price to place a sell trailing stop order.
3. Users Scenario
Scenario 1:
A wants to sell BTC and he hasn't set an activate price for the trailing stop order. The latest price for BTC is 30,000 USDT. A places a trailing stop order as shown below.
Callback rate: 5%
Amount: 1 BTC
Assuming BTC's price rises to a historical high of 40,000 and then drops to 38,000, the trailing variance is 2,000 and the trigger condition is met (40,000 - 2,000 = 38,000). The system will then help James sell at the market price.
Scenario 2:
B wants to buy BTC and the latest price is 40,000 USDT. B places a trailing stop order as shown below.
Callback rate: 5%
Activate price: 30,000
Amount: 1 BTC
Assuming BTC's price drops to 30,000 USDT, the order becomes activated. Then the price falls all the way to 20,000 USDT before rebounding to 21,000 USDT, meeting the trigger condition (20,000 * (1 + 5%) = 21,000). The system will then help Jean buy at the market price.
4. Notes
(1) Your positions and margin will not be frozen until the trailing stop order is triggered. Please make sure you have enough positions or margin available.
(2) A trailing stop order might not be triggered successfully because of price restrictions, position restrictions, insufficient margin, being in a non-trading status, and system errors. Once successfully triggered, the subsequent market orders might not execute, just like a regular market order. You can find the unfilled market orders under Open Order.
(3) If your order is filled, it will either close your existing position or open a new one. If your order fails to fill, your position and margin will still be available.
(4) The number of orders that can be placed with a trailing stop order varies for different types of contracts. The orders will be placed at the market price. The restrictions are subject to changes in the market conditions.
IBIT Team
March 7, 2024
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