Both Entry & Exit orders can be placed via Limit/SL-L orders or Market orders. Here are some frequently asked questions about our Limit/SL-L order feature used with the Live Execution feature in our Algo Trading Software.
What is the difference between Limit/SL-L order and Market order?
- Limit/SL-L Order: In this feature a Limit/SL-L order, with the defined trigger & limit price, will be sent to your broker and shall be placed in the order book of your broker either in advance or at the time of condition being met.
- Market Order: In this feature no order is sent to your broker in advance. The system fires a market order as soon as your condition is met.
What is Trigger and Limit buffer?
A SL-L order needs to define its trigger and the limit price. Trigger price is the price at which your buy or sell order becomes active for execution. Once the price of the option hits the trigger price set by you, a limit order, with the price set by you, becomes active for execution on the exchange servers.
You can set the trigger and the limit price using the trigger and limit buffer both in terms of points or percentage. Say you Sell BANKNIFTY CE 38000 for Rs 100 and define a stop loss of 30% to it, which means your stop loss is at Rs 130. You then select the order type as “Limit”, choose buffer type as “Points”, trigger buffer as 1, and limit buffer as 2. In this case, a SL-L order will be placed in your broker’s order book as follows: Trigger price = 130 – 1 = Rs 129 & Limit Price = 130 + 2 = Rs 132. This means, as soon as the LTP breaches trigger price of Rs 129 a Limit order of Rs 132 becomes active for execution on the exchange servers.
Entry Limit/SL-L orders
Positions can be entered using Limit/SL-L orders. The order settings will be as follows:
- Time Based Entry: A Limit order based on the LTP along with the limit buffer is sent at the time of entry. The Limit Buffer is added in case of a Buy order while the Limit Buffer is subtracted in case of a Sell order.
- Simple Momentum: Based on your condition a Limit or a SL-L order is sent in advance to your broker
- Simple Momentum up (instrument) + BUY = SL-L order is placed in advance based on Trigger and Limit buffer
- Simple Momentum down (instrument) + SELL = SL-L order is placed in advance based on Trigger and Limit buffer
- Simple Momentum up (instrument) + SELL = Limit order is placed in advance without any buffer
- Simple Momentum Down (instrument) + BUY = Limit order is placed in advance without any buffer
- All Simple Momentum strategies based on underlying points are entered via Limit order with a limit buffer as soon as the entry condition is met.
- Re-Entry on Tgt/SL: All Re-entry orders are either placed in advance or a Limit order is sent at the time of condition being met.
- Re-Cost: Limit/SL-L order sent in in advance to your broker.
- Re-ASAP: Limit order with limit buffer is sent as soon as the previous leg exits.
- Re-Momentum on Instrument: Limit/SL-L order sent in advance to your broker based on the set momentum as soon as the previous leg exits.
- Strategies that are based on the underlying are entered via a Limit order as soon as the Re-entry condition is met.
- Range Breakout: All Range Breakout strategies that are based on the instrument have a Limit/SL-L order sent to your broker as soon as the range time ends. For strategies that are based on the underlying a Limit order is sent as soon as the break condition is met.
- General Points:
- Make sure that your limit and trigger buffer do not lead to a NEGATIVE limit or Trigger price. In such a case the limit order will be rejected and we will enter the position via Market order.
Exit Limit/SL-L Orders
Positions can be exited using Limit/SL-L orders. The order settings will be as follows:
- Stop Loss defined on Instrument: A SL-L order is sent in advance to your broker.
- Target: If the leg does NOT have a SL defined on instrument, then a Limit order without any buffer is sent to your broker in advance for the target profit price.
- If the leg has a SL defined on instrument and a SL-L order already is placed in advance, at the time the target condition is met this SL-L order is modified to a limit order with the Limit buffer.
- Time Based Exit: A Limit order based on the LTP along with the limit buffer is sent at the time of exit. The Limit Buffer is added in case of a Buy order while the Limit Buffer is subtracted in case of a Sell order. If a Limit/SL order is already placed for exit, then the existing order is modified with LTP and limit buffer.
- Trail Stop Loss: Your placed SL-L order is modified periodically based on your strategies trail condition, and monitoring type.
How can SL-L orders reduce slippages?
Sometimes sudden moves in the market, especially during expiry, lead to a spike in option prices due to the gamma effect. In such situations, having an SL-L order in the order book helps control slippages. As soon as the trigger price is breached, your LIMIT order with the defined LIMIT price based on your limit buffer is sent to the exchange. So in most cases , the maximum slippage you suffer is the limit buffer.
Whereas in such cases if a Market order is sent, no one can predict at what price, above or below your SL price, will the order be fulfilled.
How can a Limit/SL-L order skip? And, what happens if the Limit/SL-L order is skipped?
A SL-L order is sent to your broker’s order book at the time of entry. Once the LTP of the option hits the trigger price set by you, a limit order, who’s price is also set by you, is active for execution on the exchange servers. In some rare cases, the price movement is so violent that the price of the option moves above the limit price before your limit order is fulfilled. Hence, your limit order remains unfulfilled. A Limit order can also skip if there is a delay, among other things, from your broker in placing the order at the time of entry or exit.
In order to avoid such a situation, we have a “Convert to Market After” dial. The “Convert to Market After” feature can have a possible value from 1 sec – 20 secs. Once a Limit/SL-L order skips, AlgoTest will keep modifying the limit based on the current LTP + the Limit buffer till the order is fulfilled or Converted to Market after the specified time.
IMPORTANT: DHAN does not allow modification of SL-L order to limit. Hence if the SL-L order skips the order is converted to market. Similarly at the time of exit, the order is directly converted to market.
Can I manually modify the limit and trigger price from the broker’s order book?
We do not suggest making changes to your SL-L order as it may lead to an error in execution of your strategy. If you would like to make any manual intervention, we recommend changing the status of the strategy to manual first and then making any changes.
Can the trigger price be Zero?
Yes, the trigger price can be ZERO. But the limit order is rejected if the trigger and limit buffer are both kept at ZERO.