BEWARE cfd limit buy orders

đź’¬ Trading 212 chat
1

Yesterday there was a company that had released positive news before market open. Pre market trading was up and I wanted to try to get some shares at a good price (using cfd). I wasn’t going to risk a market order so before market open I placed a limit buy order with a price above the previous close but below what the premarket was.

When the market opened it immediately gapped up from the previous close and my order executed at the market price (roughly 10% ABOVE my limit buy order).

I contacted customer service who said yep that’s correct!!!

So if you create a limit order above the current market price it isn’t a limit order it is a stop buy order that will execute once the price exceeds the limit price entered and can execute at any price above the price you set.

I have a few issues. Firstly a stop buy order seems a bizarre thing - why would you want to create an order only if the price rises and then buy above the threshold price! That aside I was creating a limit order that the system just took as a stop buy order.

There are numerous occasions where the market is closed and you might want to create a limit order with a price above the previous close but T212 will process these as stop buy orders and if the price gaps up it will then execute them at any price above the price you set as a limit price

2

A limit Buy order above the market price cannot exists by itself; when a limit order is placed, it will be immediately executed if there are any price lower than it available.

The behaviour you are looking for arises from a Stop Buy or a Stop limit.

3

I placed a limit order but because it was above the previous market close (even though premarket trading was higher) the system entered the limit order as a stop buy order and then executed it after the market gapped up on opening.

It is (imo) crazy that you can enter a limit order but it is submitted as the complete opposite (a stop buy).

eg close at 100, good news released, premarket trades at 120, place limit order at 115, market opens at 130, order is executed at 130

4

Pre-market is not market price; for the agent executing your order, you limit price is higher than the last traded price.

I get that it might be unintuitive behaviour, but it is a perfectly normal one.

Some lessons you learn the hard way.

5

I disagree. At best it is extremely poor UI design. A limit order and a stop buy order are complete opposites. If you are entering a limit order you expect it to be processed as a limit order.

Essentially you are saying that if you know a share is going to gap up it is impossible to create a limit order before the market open in the hope of getting a position at a reasonable price before it hopefully rises further.

The UI is appalling designed and if stop buy orders are supported they should be a separate tab (like market, limit and oco are separate tabs). Even during trading there are times when a price is very volatile where you want to create a limit order very close to the current price but with T212 if the price momentarily dips as you submit the order, your limit order could be converted to a stop buy order and executed at any price.

If I want to create a limit order its simple. I want a limit order not a stop buy

6

Which means immediate execution when the specified price is above market price. That is the intended behaviour.

And price guarantee may disappear as well, as they are then processed as a market order.

This is how a limit order is defined by the exchange. It absolutely is the intended behaviour.

Of course! If you “know the price will gap up”, nobody will be willing to sell to you for less than the prevailing price, which as you mention, is up.

That’s what gapping means.

A Stop Limit would be a great option, which o don’t believe T212 offers sadly.

7

If you know that a share is likely to gap up you will often want a limit order because you don’t a market order executing at a random price and you can’t predict how much it will gap. Thus it is the perfect time to use a limit order so that you can set a price that you’re happy with, without taking the risk of an order executing high. Thus in the example I gave, you know it closed at 100, with the news you think there’s a chance of getting some shares at 115 if it doesn’t gap up too much at open but you want to limit it to that. Thus create a limit order at 115. However, T212 will process it as a stop buy order and execute it at any price over 115 (the complete opposite of what you wanted).

No a limit order sets the maximum price not the minimum price. Edit: sorry misread your comment. Yes that is the proper behaviour of a limit order. However, I enter a limit order in T212 and it executes as a stop buy when the market price is above the price set (not the where the price set is above the market price)

8

Essentially you are saying that if you think the price is going to open up, it is impossible to create a limit order with T212 because if you do it will not be treated as a limit order it will be executed as a stop buy. Sorry but I think that is crazy and appalling design in the UI

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9

I’m glad this was discussed, I very likely would have got it wrong.

In the CFD “Limit/Stop”, I think it depends which way the price is going.
For the buying-on-open scenario, I think it must be implied that the price has swept through the Stop price, going up, so the purchase is triggered. It can’t trigger (at Stop) and Limit at the same price.
So if at end of day it’s 100, and you set a “Limit/Stop” at 102, the buy is triggered, as a Stop Buy, and you get a fantasy price somewhere north of the opening price. I assume that’s part of where T212 make their living.

You can set a Limit going down, not up.

The BOT says, "The “limit/Stop” button allows you to choose between a Limit Order and a Stop Order. You can select the order type based on your trading strategy and the market conditions.

Its verisimilitude is sub-optimal.

In the Invest platform, I think you CAN get what you want, with a buy “Stop Limit” (note not “Limit/Stop” as in cfd). There are the necessary two prices, one for the Stop and one for the Limit. The buy is triggered at 102, but it wouldn’t buy at 102 if you put the Limit there unless the price came back down from its opening high spike.
So if you had put the Lmit at 50 the buy wouldn’t happen.


[If anyone ever thinks I'm wrong on anything, I may well be, please let me know!]
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10

A limit order and a stop buy order are complete opposites. One sets a maximum price you’re prepared to pay and the other will execute at any price as long as its over the price set in the order (ie the order sets a minimum price). I think I’m correct saying that in the Invest and ISA platforms both types of order are separated on different tabs which is how it should be. In the cfd platform that made the decision (which I think is a ridiculous decision) to combine the two orders and have the software decide which is created depending on whether the order price is above or below the current price.

This means that it is impossible to set a limit order overnight if you think that the price will gap up because you’ll want to create a limit order with a price higher than the previous close but at or below what you think may be a bargain open price. Because the price you want to set is above the previous close the system will create a stop buy order which it then executes at any price no matter how high

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11

I don’t think of them as opposites.
It’s not trivial to get the words right so they’re always right regardless of buy/sell/price move direction.

It’s complicated.
T212 offers a few different types of order, of the whole range which is (theoretically) available.
You can use a Stop order to open or close a trade/position.
You can also use a Limit order to open or close one.
And there are, as T212 does use, combination orders
And, unfortunately, some folk online use slightly different words for the same things.

Having thrashed through various sites for definitions, th best explanations I can find are here: 🟢STOP AND LIMIT ORDERS EXPLAINED🟢 for OANDA:EURUSD by ProSignalsFx — TradingView

In the case we’re discussing, a STOP entry order just means Buy at best, when the price is hit. No Limit.
That one, T212CFD offers.

Going LONG:
On T212Invest, you can do a STOP LIMIT ORDER
where the STOP specifies the price at which the trade is triggered, but not executed, unless the The LIMIT is satisfied - the maximum price you’re prepared to pay.

A plain LIMIT order sets a maximum price that you’re willing to pay or a minimum price that you’re willing to accept on a sale, and just goes ahead as soon as the price condition is satisfied. Maybe immediately, maybe later.

On buying (Longing?!?)

A plain Stop order (aka Stop Entry order) will just buy at market price when the price is hit. (Some brokers call them “stop on quote”. Which means just buy at market price when the price gets up to that price.

So, a STOP LIMIT order allows you to trigger an order at a specific stop price and then only carry out the transaction if it can be completed at a certain limit price. The risk of a stop-limit order is that it may remain unfilled or be partially filled.

I’l leave Shorting, for now
(until I’ve got it sorted in my head!)

[Don’t ask the BOT, by the way. It doesn’t understand Shorting much, and keeps coming back with “Thank you for pointing that out” or “Thank you for correcting that” :zipper_mouth_face:].

12

Testing the Stop-Limit on T212Invest this morning, It doesn’t respect your limit.

It went over by 90 pips :face_with_raised_eyebrow:!

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