Track 'n Trade Futures End of Day

Stop Orders

Video Transcript

In this Track 'n Trade Pro Trading Training video, I want to talk to you about Orders. In specific, I want to talk to you about Stop Orders. What is a Stop Order? A Stop Order is probably going to the order that you use the most. Now, we use Market Orders quite a bit, too. But Stop Order is probably the one you're going to use the most of all.

Now, let's talk about a Stop Order. A Stop Order is very unique because it has different rules on it, depending on whether the market is going up or whether the market is going down. Whether you think the market is going to be going up or down. And which way, or which direction you want to get into the market.

Now, let's come back and talk about the rules for a Market Order. Let's use this little bracket area, as an example for using Stop Orders, okay? Let's bring the market back to this point in time. We can do that with our Play Controls. We've got this little narrow, sideways channel, right? We know that when markets break out of narrow sideways channels, they either go one way or the other. If it's going to break out of a channel-down, we want to go short. If it's going to break out of a channel-up, we want to go long.

We don't care which direction it goes, we just want to go with it, right? So, one way you can take advantage of this type of a reoccurring Price Pattern, is with Stop Orders.

What we're going to do, is we're going to come in here, and we're going to place a Stop Order, to Buy on a break above the channel. So, we're going to go Buy 1, at a Stop at 176.41. Now, 176.41 was chosen by our placement, which is 176.41.

So, what does that mean? That means that the market has to actually go up and touch 176.41. If it does that- that's the trigger to the market; or to the floor in Chicago, to fill your order. Now, that does not mean that you're going to get 176.41, for that order. Because think about what is going on, again: We've got 200 guys standing down in a Pit in Chicago, and you say, 'I want to Buy at 176.41.' Well, the trigger is, that if the market goes up and touches that price, 176.41. That Stop Order, then immediately turns into a Market Order.

Now, what's the rules for a Market Order? The rules for a Market Order are that they need to fill your order as soon as possible with whatever price they can get at the time, right? It may be a little bit below 176.41, it may be a little bit above 176.41. But it may be exactly on 176.41, if you're lucky. But usually there's a little bit of movement, in there, on one side or the other. Because think about it, at any given time, on the floor, on the trading floor- there's going to be a range. A range of prices that are active. Just like in the opening session. The opening 5 minutes, right? Not everybody is trading at exactly the same price. That whole floor is a bidding, is an auction for this product. There's a whole bunch of people trading back and forth in the auction.

So, what's happening is different prices are taking place at different times, very quickly. So, your order may, once the market goes up, and hits 176.41, because that's where you placed your Stop Order. It then, immediately becomes a Market Order, which then, is sent to the floor and says fill me as soon as possible at the current price.

So, that's called slippage. Alright? Slippage is when you get something different than what you asked for. So, I asked for 176.41, but the market actually filled me at maybe 176.51. Well, that's good for me, or bad for me. One way or the other, depending on whether the slippage went in my favor or against me. Usually, it's going to against you. That's true, okay..

So, we're going to go in and we're going to bracket the market. We're going to put a Buy Stop above the market. Now, notice that's the rule. Buy Stops, go above the market, and Sell Stops go below the market. Okay? Buy Stop- above the market. Sell Stops- below the market.

So, I'm going to Sell 1 Stop, at 172.37, and I'm going to hit Okay. Now, what if I try to put a Sell Stop above the market. Now, what do I mean- above or below the market? The current market price is where the market is trading. Right here, is where the market is trading. Right on this horizontal line. The close of the last Tic, right; is where the market is trading. So, right in here....is the market price. So, I have to place my Sell Stop below the last Tics close, or a Buy Stop above the last Tics close. Okay?

What if I try to put a Sell Stop above the last Tics close. Well, if I come in here, and I put a Sell Stop: Sell 1 Stop, and I'm above the market, and I hit Okay- the software is going to come up and say, 'UH, can't do that! Illegal operation. Stop Orders to sell, must be placed below the current market close price.' So, we need to make sure we're using the right rules. Now, if you're not sure what the rules are, you can always come down here to Help, and it will expand down here. We can go through and we can look at how we handle those.

So, we can come in here and we can say okay, I want to look at my Stop Order. It's going to give you a description of the Stop Order. Place a Buy Stop Order above the market price. Place a Sell Stop Order below the market price. A Stop Order becomes a Market Order when the specified price is reached. Track 'n Trade fills these orders at the specified price. If the price is within the trading range, of the filled date. Or at the opening price of the fill day.

So, just like we said, we're going to go in and we're going to fill that at the price specified. So, we do not simulate slippage. We're not going to give you a different price than what you specified. So, you say, 'Well, Lan, I placed my Stop Order, I placed my Stop Order at 176.41, and the market, when they actually filled it-' (and let's come in and do this. Let's say we opened up our account with $20,000.00) 'The market actually, this, Track 'n Trade filled my order at 177.10, but I really got filled at 177.20. So, what do I do about that? I want to try and track my real trade, with track 'n Trade.'

Well, it's very simple. Just right click on the tool, come in here, to Settings. Say, Oh, I was filled at 177.20. You would make the change in here. You hit Okay. Then Track 'n Trade adjusts it, and will make the changes over here, in your Accounting System to follow as closely as possible to your actual trade.

Now, as the market moves forward, it will calculate very closely to what you actually did in the real market.

Now, notice that when this market jumped up and filled. It filled on the Open. Even though the Stop Order was placed, right at 176.41. We placed the Stop at 176.41, but we simulated the trade and we were filled at 177.20. That's because the market gapped. Okay? It gapped over our price. It gapped over our price and so the very first opportunity that the floor broker had to fill our order was on the open of that day. So, that's why Track 'n Trade simulated doing the exact same thing. We filled your order at the open of the first opportunity.

So, a Stop Order becomes a Market Order, once the price has triggered it and hit it.