Gap beyond entry AND stop

K

kankan

I was wondering if anyone can help explain this potential situation. I've never experienced it but certainly it's something to be aware of, which is why I am asking. Let's assume the orders are tiny comparing to available liquidity.

Say you have a buy limit order at 100 with a market stop at 90. The price gaps down from 110 to 80. What is most likely to happen?

(a) Your limit order gets triggered around 80, stop order gets submitted to the exchange, it gets triggered almost immediately (maybe around 80)?

(b) Or you get filled at 100 and then the price would gap to 80 at which point your stop gets executed at whatever price.

(c) ???

Any good way of dealing with this?

Thanks!
 
kankan said:
I was wondering if anyone can help explain this potential situation. I've never experienced it but certainly it's something to be aware of, which is why I am asking. Let's assume the orders are tiny comparing to available liquidity.

Say you have a buy limit order at 100 with a market stop at 90. The price gaps down from 110 to 80. What is most likely to happen?

(a) Your limit order gets triggered around 80, stop order gets submitted to the exchange, it gets triggered almost immediately (maybe around 80)?

(b) Or you get filled at 100 and then the price would gap to 80 at which point your stop gets executed at whatever price.

(c) ???

Any good way of dealing with this?

Thanks!
More...

I would assume both orders would be executed.

If the price is 80, you've got a limit order in at 100 which is good, and you've got a stop order at 90 that is triggered.
 
SillyWilly said:
If your stop is 90, you will get filled at market open if the stock opens at 80, for 80
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But then if it gaps open at 80 and it gets filled around there, would the stop get triggered immediately afterwards then?
 
eves_banished_children said:
I would assume both orders would be executed.

If the price is 80, you've got a limit order in at 100 which is good, and you've got a stop order at 90 that is triggered.
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Sorry, didn't quite understand. You mean that the limit order would be filled at 100 or at 80?
 
take a smaller gap with the same situation. both orders will get filled rapidly. entry better than limit and stop (market) as chosen below entry.
 
kankan said:
I was wondering if anyone can help explain this potential situation. I've never experienced it but certainly it's something to be aware of, which is why I am asking. Let's assume the orders are tiny comparing to available liquidity.

Say you have a buy limit order at 100 with a market stop at 90. The price gaps down from 110 to 80. What is most likely to happen?

(c) ???

Any good way of dealing with this?

Thanks!
More...
Seldom happens, it could, around earnings;
that's a 30% gap down. BUT if it does gap down that much[+seldom happens]= you could wait for it to give you some direction, unless you are building a long term position.Panic sellers never win;planned sellers could win.:cool::cool:
 
murray t turtle said:
Seldom happens, it could, around earnings;
that's a 30% gap down. BUT if it does gap down that much[+seldom happens]= you could wait for it to give you some direction, unless you are building a long term position.Panic sellers never win;planned sellers could win.:cool::cool:
More...

I agree, it's not very common but it could happen and it could be ugly so I am trying to prepare for this by understanding how things might play out. By the way, the numbers were purely hypothetical. Thanks.
 
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