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Trailing Limit

A Trailing Limit order has the same characteristics as a Trailing Stop order. The only difference is that a Trailing Limit is placed in the book of orders as a limit order once the stop price is met.

In addition to the stop price difference, a Trailing Limit order also includes "Limit Price Deviation". This deviation works using the same principle as the stop price deviation. This continuously seeks to move the order's limit price in the same direction as the stop price, by the defined deviation, which is calculated just like the stop price from the reference price.

The price defined most recently for a given security is called the "reference price". A reference price is shown between the best bid and the best offer.


How does the order work?

1. The order can be entered as a sell or a buy order. The most frequently used order is a sell order, which sells shares after the stop price is reached, while a buy order purchases shares once the stop price is reached. This always occurs above the local maximum in the case of a sale or the local minimum for a buy.

2. Once the order is validated, the "initial stop price" is defined. The calculation of the initial stop price differs depending on the direction of the submitted order (buy or sell).

  • For a sell order, the initial stop price is calculated by subtracting the value in the "Stop Price Deviation" field from the current reference price when the order is validated.
  • For a buy order, the initial stop price is calculated by adding the value in the "Stop Price Deviation" field to the current reference price when the order is validated.

3. The "initial limit price" is calculated along with the initial stop price. The calculation of the initial limit price once again depends on the direction of the order.

  • For a sell order, the initial limit price is calculated by subtracting the value in the "Limit Price Deviation" field from the current reference price when the order is validated.
  • For a buy order, the initial limit price is calculated by adding the value in the "Limit Price Deviation" field to the current reference price when the order is validated.

4. The order then starts tracking changes in the current reference price and changes the stop price and the limit price using the entered parameters.

  • For a sell order the stop price and the limit price are adjusted when the reference price decreased by the stop price deviation and limit price deviation is higher than the currently defined values for the stop price and limit price.
  • For a buy order the stop price and the limit price are adjusted when the reference price increased by the stop price deviation and limit price deviation is lower than the currently defined values for the stop price and limit price.

Example of using a Trailing Limit order

A Trailing Limit order is used when you want to enter a sell Stoploss order (automatically sell shares if the price drops to a pre-defined value - the stop price), which automatically increases the stop price to remain between the highest achieved price and the current stop price during order validity with a maximum difference of the stop price deviation. If the difference between the reference price and the stop price is lower than the defined stop price deviation, the stop price remains at its maximum achieved value.

  • Sold quantity: 5,000 shares
  • Stop price deviation: CZK 8
  • Limit price deviation: CZK 10

Bids and offers when the order is submitted:

The Trailing Limit order is not shown to the market and waits for the conditions for its activation to be met. The initial stop price is generated at CZK 855 (863 - 8). The initial limit price is generated at CZK 853 (863 - 10).

 Price (CZK)Cumulative number of shares 
 869,3045 000Offer
 867,0040 000
 866,8035 000
 865,0030 000
 864,0010 000
 863,00 Last trade
 862,005 000Bid
 861,0010 000
 860,0020 000
 857,3025 000
 855,0030 000

Situation with a price increase:

The stock's reference price increases to CZK 879. The Stop Price moves with the increase in the price and is fixed at CZK 871. The current Limit Price is CZK 869.

 Price (CZK)Cumulative number of shares 
 882,0045 000Offer
 881,0040 000
 880,8015 000
 880,0010 000
 879,005 000
 879,00 Last trade
 878,005 000Bid
 877,4015 000
 876,3020 000
 872,0025 000
 871,0035 000

Activation of the sell Trailing Limit order:

If the price then drops, the Stop price remains fixed at the highest achieved value (CZK 871). The conditions are met to activate the order (the reference price equals the stop price) and a sell order is sent to market with a limit price of CZK 869. This is paired with the best bid on the market and the trade is completed at CZK 870.5.

 Price (CZK)Cumulative number of shares 
 881,0040 000Offer
 880,0030 000
 873,8015 000
 873,0010 000
 872,005 000
 871,00 Last trade
 870,505 000Bid
 870,4010 000
 870,0020 000
 869,0030 000
 868,0040 000

Placing an order

For sell and buy Trailing Limit orders the Limit Price Deviation must always be larger than the Stop Price Deviation.

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