Here are some frequently asked questions about our SL-L order feature used with the Live Execution feature in our Algo Trading Software.
What is the difference between SL-L order and Market order?
After entering into a trade say, Buy Banknifty CE 38000 for Rs 100, you define a stop loss of 30% to it. In Live Execution you have two options to execute your Stop Loss.
- SL-L Order: In this feature a SL-L order, with the trigger & limit price predefined by you, will be sent to your broker and shall be placed in the order book of your broker after taking entry into the trade.
- Market Order: In this feature no order is sent to your broker after taking entry into the trade. The system fires a market order as soon as the LTP breaches your defined stop loss.
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, who’s price is also set by you, is sent to 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 Buy Banknifty CE 38000 for Rs 100 and define a stop loss of 30% to it. You then select the order type as “Limit”, choose buffer type as “Points”, trigger buffer as 1 & limit buffer as 2. In this case, a SL-L order will be placed in your broker’s order book as follows: Trigger price = Rs 129 & Limit Price Rs 132. This means, as soon as the LTP breaches trigger price of Rs 129 a Limit order of Rs 132 will be sent to the exchange and your Stop Loss order will be fulfilled.
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 SL-L order skip? And, what happens if the SL-L order is skipped?
As mentioned above, 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 sent to 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 the broker is able to send limit order to the exchange. Hence, your limit order remains unfulfilled and your Stop Loss is never triggered leading potentially to unlimited loss.
In order to avoid such a situation, we have an inbuilt feature that converts your Limit order into a market order as soon as the LTP goes above your defined limit price. This is done only in situations where your limit order is unfulfilled even though the LTP rises above it.
Which all strategy conditions do not have the SL-L order type yet?
Currently the following strategy conditions do not have the SL-L order feature:
- Trail Stop to breakeven (Will be implemented in the second iteration)
- Leg wise TSL condition (Will be implemented in the second iteration)
- SL based on underlying points/percentage (SL-L order not possible for such conditions)
- Overall SL/Target based on MTM or Total premium % (SL-L order not possible for such conditions)
- Square off Complete (SL-L order not possible for such conditions)
- Target Profit (Will be implemented in the second iteration)
- SL-L on entry either time based entry or entry via simple momentum
If any of the above conditions, other than the last two, are activated in your strategy, the system will not give you an option to put an SL-L order. The system itself shall fire a market order once the condition is met.
Which all conditions currently do have the SL-L order type?
Currently the following strategy conditions allow you to put the SL-L order type:
- Simple Stop Loss based on points/percentage
- Re-entry Stop Loss condition WITHOUT a trailing stop loss condition
- Simple momentum Stop Loss condition WITHOUT a trailing stop loss condition
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 strategy will go into ERROR if the trigger and limit buffer are both kept at ZERO.