Hi T212 & Everybody,
I’ve been trying to figure out if there is an order type that exists, which if it did, I could really use in my trading.
I’m very new to trading, so I know very little about what tools are available to institutional professionals versus what are available to “amateurs”.
The order type I would love to find out exists, is what I’m calling a “Trigger Limit Trap”.
As far as my meagre understanding has carried me so far, I think it’s basically a Sell Stop Limit order, flipped over and repurposed to allow the trapping of a falling price in order to achieve a better Buy price.
In fact it occurs to me that it could be a “Trap” that works for both the Buy side and the Sell side, and also work anywhere up and down the price chart, for bounding a range between two different advantageous prices. It would only be a case of defining which barrier (high price or low price) was the “Trigger”, and which barrier was the “Limit”.
I’ve made an annotated chart that explains what I’m advocating for. Just read the numbers from 1-7 to follow the narrative.
Hope this makes sense, and appreciate any further info anyone can add.
Regards.
CT
PS,
Although my particular use case at the moment is that I want the Buy price to fall into a "trap” below the current price action, this could easily be reversed for trapping a Sell side price above the current price point.
The programming/technology for this order type already exists (basically a traditional Stop Limit), but simply needs to have the logic changed to allow a falling price to be “trapped” for a guaranteed and then potentially better Buy price, and vice versa on the Sell side (price rising).
I’ll explain it in words for the Buy side, in case that helps with understanding what I’m trying to achieve.
- I’m running a “Short Sniping” strategy, using a particular indicator that signals when the momentum is downward.
- I have an amount of shares I’m working with (100), and I’m looking to “snipe” an extra share.
- My red “sell” signal hits, and I sell at the current market price ASAP.
- I immediately take the market price I get, and work out the minimum re-entry price to buy back 101 shares with the same amount of cash I have just realised through the sale (for a 1% share increase on a $300 sale price, I calculate 300 divided by 1.01 which equals $297.03).
- I enter this price and it forms the first barrier that the price comes down towards (the old style Limit order price which is BELOW the current market price).
- Once the price arrives down there, instead of this triggering an automatic Buy (like a standard Limit order), the price passes into the “chamber of never-ending doom” below, and this triggers locking in my “minimally best Snipe price” at $297.03.
- The bottom “Limit” boundary that I also set, is some distance further below this price (maybe a predetermined percentage), and as long as the price stays bouncing around within these two boundaries without actually touching either of them, it’s stuck in the trap.
- There are now three possible outcomes. Either the price climbs again sufficiently to pass through the top boundary and my “minimally best Snipe price” is triggered and I have my Buy secured at $297.03, or the price continues heading South and passes out through the bottom boundary, thereby automagically achieving a much better Buyback price, in which case, happy days, as I’ve exited my position better off than the original simple Limit order would achieve.
- OR, if my price is bouncing around like a trapped Electron, but I want to free up that tranche of capital, I execute my Buyback by hand, and I’ve achieved the objective of “sniping” a 101 share bounty for my original $297.03 price or better, and collected up an extra share as planned!!?
- This "Box Trap’ could be used anywhere up and down the price scale, and even inverted for a “Long Trap”.
CT
