Difference between stop and if-touched orders

B

BladeTrader

Can someone explain the difference between a stop order and a market-if-touched (MIT) order?

Similarly, the difference between a stop limit order and a limit-if-touched (LIT) order is also unclear.

Thanks.

Per IB's User Guide:

Stop:
A Stop order becomes a market order to buy or sell securities or commodities once the specified stop price is attained or penetrated.

Market If touched:
An MIT (market-if-touched) is an order to buy (or sell) an asset below (or above) the market. This order is held in the system until the trigger price is touched, and is then submitted as a market order.

Stop Limit:
A Stop Limit order becomes a limit order once the specified stop price is attained or penetrated.

Limit-If-Touched:
An LIT (limit-if-touched) is an order to buy (or sell) an asset asset below (or above) the market, at the defined limit price or better. This order is held in the system until the trigger price is touched, and is then submitted as a limit order.
 
Found this from a link off a link of a link in the IB User's Guide...

"An LIT order is similar to a stop limit order, except that an LIT sell order is placed above the current market price, and a stop limit sell order is placed below."

"An MIT order is similar to a stop order, except that an MIT sell order is placed above the current market price, and a stop sell order is placed below."

So there's your answer...stop asking me these easy questions! :p
 
You would use a Market-if-touched (MIT) order in the place of a Limit order. A limit order can only be filled at the specified price 'or better'. The downside to a limit order is that the market can hit your limit price and you may not be filled. The market could hit your price, reverse and your order may not be executed at all.

The MIT order turns into a market order once the price is hit. So you will get filled on the order, however you may get some slippage. The order will be filled at the best available price.

Another way to think of the MIT is that it works just like a stop order, which also turns into a market order once the price is triggered. Of course a Stop goes on the losing side of your trade, whereas a MIT goes on the profit side.

I hope this helps you.
 
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