Can someone explain this to me? Capping of a Limit Order Price.

[Midnitewolf]

I am rather new to trading and using the simulator today when I got a message about my limit order price being capped which really confuses me because I have live traded on TD Ameritrade in the same fashion without any message.

The situation was I bought into HTZ at around $2.04 a share with an automatic stop loss placed at $1.89. The stock took off so as the price increased, I kept moving my stop loss up manually. When the price hit $2.45 a share I tried to move my stop loss up to $2.40 with the intention letting the price fall back to stop loss and taking profit.

As soon as I tried to put my stop loss up to $2.40. I got a screen pop up message with the following:

"In accordance with our regulatory obligations as a broker, we will initially cap (or limit) the price of your Limit Order to 2.28 or a more aggressive price still within your specified limit price.

It goes one to say something about the maximum allowed distance and something about an orderly market followed by this may cause my order to not be filled or filled poorly.

I have attached the message as a screen cap of my chart at the time of the message for review as well.

I called customer service and the guy I spoke to couldn't really explain why it happened and just told me that even if I got this message it shouldn't effect me but that some times It might cause an issue where I would have to call them to get the cap removed.

Also, since the screen popped up covering my chart, I couldn't see what happened but upon review the price capped out at about $2.50, then came down and despite having moved my stop to $2.40, my stop loss order executed at $2.28 with a number 1 indicated next the the price in my trade log. Based on this, it would seem that unlike what the customer service agent indicated, it did indeed effect me and I missed out on something like .14 cents a share which would have been around $560 which is unacceptable.

Can someone explain to me what happened here and if there is a way to avoid it? I am assuming I am doing something wrong since I am new but since I have traded this way successfully in a live environment on TD Ameritrade's TOS platform, I can't figure out for the life of me what I might have did.

Thanks in advance.

 

[smallfil]

My experience is brokers will at times narrow the distance of the stop loss to the current price. I think the reason being, that such orders are rarely filled and they want more transactions to take place. Much worst is selling a stock that has not triggered a stop loss. My friend with an Etrade account had this happen twice. Her stocks got sold and supposedly, the stop loss was hit. You check the low of the day and it never reached the stop loss trigger price, so why was it sold? Etrade insists it was triggered. It was not because it never reached the stop loss price.

 

[Midnitewolf]

What confuses me is that I was in the process of tightening up my stop loss so the gap would have been within .10 cents of the bid/ask level. That being the case, I can't see how the stop loss I tried to set was further than the maximum allowed distance from the current reference price calcuated by IBKR as it says in the message.

I think I had it at $2.15 prior to moving it up. HTZ had just moved past $2.40 and had started to bounce a bit when it hit $2.50 as it common. I figured it was losing steam so was attempting to move my stop loss up to $2.40 and if HTZ couldn't break $2.50, just let it fall back to the stop loss and take profit. I dropped the order at $2.40 while the stock was still bouncing at $2.50 and that is when the message popped up, obscuring my chart so I didn't get to see what happened. All I know is the price dropped and I was stopped out.....at $2.28 indicated in the message, not the $2.40 I had indicated.

I mean it even says, "In the future, please submit your order using a limit price that is close to the current market price." but how is $2.40 further from the ask of $2.50 than my original stop order prior to that at $2.15???

It almost makes me feel like I was cheated to be honest. It's kind of like they decided that any order more than 5 cents from the Ask was unacceptable and they intentionally moved my price so that I would be in a less favorable position.

Honestly, this sucks because I was just about to go live with IBKR but now I am starting to lose confidence in the Broker. Maybe I should have just went with Lightspeed after all.

 

[qlai]

I didn’t read the whole thing, but with IB, don’t try to find why, just decide if what they offer is acceptable or not. I gave up on using aggressive limit orders - I either use passive orders or market orders. But I get weekly emails from IB on dangers of using market orders. Lol. If you trade stuff like HTZ, IB may not be best choice.

 

[Midnitewolf]

I didn’t read the whole thing, but with IB, don’t try to find why, just decide if what they offer is acceptable or not. I gave up on using aggressive limit orders - I either use passive orders or market orders. But I get weekly emails from IB on dangers of using market orders. Lol. If you trade stuff like HTZ, IB may not be best choice.

Yeah I just had it happen a second time. Same situation, stock going up fast and moved my my stop up to be very tight with the intention of just letting the price fall back into my stop close. In this case the stock was trading at $1.94 so I put the stop loss at $1.86, got the message again that I was capped at $1.81 and then, despite the log saying I had a working sell order at $1.86, it sold at the capped amount of $1.81.

So I called IB back a 2nd time because what I was doing is the exact opposite of what the message is telling me I am doing to get my order capped and this guys explained it likely had something to do with the fact I was using a simulated account at the time. If it is just the simulator hiccuping, then OK but the issue is, do I trust that this issue only exists in the Simulator.

All I can say is what a pain, I got TD Ameritrade, my first Broker, lagging all the time and costing me real money so I move to Trade Station. Trade Station seems to have the same lag issues so I move to IB. Now that I am on IB, I am getting crazy messages that IB is arbitrarily modifying my orders based on me doing something I am not actually doing...blah. It can't really be this hard finding a good broker, can it?

Anyway, I think you called it, either I trust what the guy told me, don't trust him but figure out a work around that I can live with or find a new broker....again.

 

[Overnight]

Yeah I just had it happen a second time. Same situation, stock going up fast and moved my my stop up to be very tight with the intention of just letting the price fall back into my stop close. In this case the stock was trading at $1.94 so I put the stop loss at $1.86, got the message again that I was capped at $1.81 and then, despite the log saying I had a working sell order at $1.86, it sold at the capped amount of $1.81.

So I called IB back a 2nd time because what I was doing is the exact opposite of what the message is telling me I am doing to get my order capped and this guys explained it likely had something to do with the fact I was using a simulated account at the time. If it is just the simulator hiccuping, then OK but the issue is, do I trust that this issue only exists in the Simulator.

All I can say is what a pain, I got TD Ameritrade, my first Broker, lagging all the time and costing me real money so I move to Trade Station. Trade Station seems to have the same lag issues so I move to IB. Now that I am on IB, I am getting crazy messages that IB is arbitrarily modifying my orders based on me doing something I am not actually doing...blah. It can't really be this hard finding a good broker, can it?

Anyway, I think you called it, either I trust what the guy told me, don't trust him but figure out a work around that I can live with or find a new broker....again.

Instead of moving the stop, have you tried cancelling the old stop order and then entering a fresh new stop at the price you want?

Moving the stop is effectively a change order, while cancelling is, well, cancelling and then you place a new order.

 

[ph1l]

Her stocks got sold and supposedly, the stop loss was hit. You check the low of the day and it never reached the stop loss trigger price, so why was it sold? Etrade insists it was triggered. It was not because it never reached the stop loss price.

My broker once told me daily high and low prices don't include odd lots, and this could explain the unexpected transaction (if the shares were an odd lot).

 

[smallfil]

My broker once told me daily high and low prices don't include odd lots, and this could explain the unexpected transaction (if the shares were an odd lot).

Good to know. I found it odd that is all. Would advise her to keep her stop losses farther away.

 

[JSOP]

What confuses me is that I was in the process of tightening up my stop loss so the gap would have been within .10 cents of the bid/ask level. That being the case, I can't see how the stop loss I tried to set was further than the maximum allowed distance from the current reference price calcuated by IBKR as it says in the message.

I think I had it at $2.15 prior to moving it up. HTZ had just moved past $2.40 and had started to bounce a bit when it hit $2.50 as it common. I figured it was losing steam so was attempting to move my stop loss up to $2.40 and if HTZ couldn't break $2.50, just let it fall back to the stop loss and take profit. I dropped the order at $2.40 while the stock was still bouncing at $2.50 and that is when the message popped up, obscuring my chart so I didn't get to see what happened. All I know is the price dropped and I was stopped out.....at $2.28 indicated in the message, not the $2.40 I had indicated.

I mean it even says, "In the future, please submit your order using a limit price that is close to the current market price." but how is $2.40 further from the ask of $2.50 than my original stop order prior to that at $2.15???

It almost makes me feel like I was cheated to be honest. It's kind of like they decided that any order more than 5 cents from the Ask was unacceptable and they intentionally moved my price so that I would be in a less favorable position.

Honestly, this sucks because I was just about to go live with IBKR but now I am starting to lose confidence in the Broker. Maybe I should have just went with Lightspeed after all.

This is IB's policy on price capping https://www.interactivebrokers.com/en/index.php?f=14186 and apparently some exchanges have their own price caps on ceilings on buy orders and floors on sell orders that may be even more strict than that of IB's. If you want the ceilings to be raised/floors to be lowered or have them lifted altogether, you can contact IB's customer service to request that.

Hope this helps.

 

[JSOP]

I didn’t read the whole thing, but with IB, don’t try to find why, just decide if what they offer is acceptable or not. I gave up on using aggressive limit orders - I either use passive orders or market orders. But I get weekly emails from IB on dangers of using market orders. Lol. If you trade stuff like HTZ, IB may not be best choice.

Yeah those market order messages are a joke. LOL I basically ignore them. If I need to get my hands on a stock or get rid of one in a fast-moving market, I will use market order however I want cuz that's the only way. I don't give a crap about orderly market. The market was already in a disorder before I used the market order and me using market order for several hundred shares is NOT going to make the market any more disorderly. LOL