Trailing Stop
The conditional order "trailing" allows to gradually adapt the initially set "trigger price" and the "limit price", to fluctuations of security quotes without the need to constantly monitor the trend. It can be used for both closing and opening positions.
What needs the option "trailing stop" reflects
Usually trigger price is chosen in relation to current quotes in order to protect oneself from sudden trend inversion. However, since the current quotes of a securities change continuously, the investor may consistently feel the need to change both prices, to keep unchanged the maximum acceptable loss.
To assign this task to Directa through the "trailing stop order" means to do so without the need to remain constantly connected to the markets and to intervene personally, also taking advantage of the speed and accuracy of a computerized system of calculation.
In few words, the logic of the order can be summarized as follows:
- Sell if price drops, "trail" if price rises, forward the order to the market if price drops again to new trigger price
or
- Buy if price rises, "trail" if price falls, forward the order to the market if price rises again to new trigger price
How does its calculation mechanism work
At each tick variation, the system will adjust, to the same percentage extent, both trigger price and limit price, this latter if different is set by the investor.
Thus will realize an automatic "dragging" effect, highly precise: in fact, the calculation of the price will consider the fourth decimal place, rather than being rounded to the second as required by the market's tick size rules; thus, as you can see in the example below for a purchase order, if a trigger price of 10.52 drops to 10.5099, the order will be entered only at the first following tick, then at 10.51 and not at 10.50.
The current price, on which the percentage of variance from limit price and trigger price is calculated, depends on market phase:
| Market Phase |
Current price |
| continuous |
last execution price |
| closing |
reference price |
| opening auction |
reference price |
| intraday auction |
last execution price |
| closing auction |
last execution price in the continuous |
In the Trade Confirmation Slip all data related to submission phase, to calculation and eventual order execution will appear.
An example
| Type of transaction: Purchase |
Stock Exchange: MTA |
| Prices |
initials |
|
| Current price |
10,50 |
|
| Trigger price |
+0,19% |
10,52 |
| Limit price |
+0,28% |
10,53 |
Later on, After a few minutes the price of Fiat falls to 10.49: the trigger price and the limit price have been "dragged" in order to maintain the same proportion initially established (+ 0,19% and + 28% compared to the current price), becoming 10,5099 and 10,52.
| Prices |
initials |
current |
|
| current price |
10,50 |
10,49 |
|
| tirgger price |
+0,19% |
10,52 |
10,5099 |
| limit price |
+0,28% |
10,53 |
10,52 |
| Executed 10,51 |
|||
Later on, price rises again and the order is finally executed at 10.51, just as it surpasses the new trigger price. Whithout the "trailing option" my order would remain unexecuted, at least until the price reaches 10.52.
Order management
The "trailing order" is managed by Directa and is available only on MTA and MOT.
It can be entered from the basic platform's Order Entry form and from Darwin Tiles as buy/see, booklet and flashBook.
The order is valid until cancelled: if not executed when condition occurs, it becomes a multiday order.
