I’ve noticed a big problem with sell limit orders in AIM (sometimes relatively illiquid) stock.
Please see below example:
I see share X market value = 100p, I sell at market rate and end up selling for 90p (10% less than advertised) which damages my profit margin and means I make a loss.
I try to employ a limit order e.g. 95p to ensure share X sells for no less than 95p.
HOWEVER according to T212 guide a sell limit order:
"is intended to secure a profit from an already opened position should the market price of the traded instrument make an upward movement
The Limit Sell price should be above the current Sell price, otherwise, it will be converted into a [Market Order]"
Therefore the above sell limit does not protect me as it’s automatically converts my limit order into a market order resulting in Stock A - shown as market rate of 100p - selling for 90p rather than waiting for 95p + as intended by my limit order.
Is there a way around this? Otherwise I’ll no longer be able to trade AIM stocks on the platform as there’s no way to guarantee profit in illiquid markets.
When you click sell you have the option of market, limit, stop and stop limit.
The Stop order is much like the limit you mention but with a stop you set a price below the current one. Once the stock drops below that price it initiates a market sell.
The Stop Limit lets you set your stop price, as described above but also lets you set your limit price. In your instance you could set your stop and limit to be 95p.
There’s no guarantee your shares will be sold though, especially with an illiquid stock and a large price fluctuation.
This doesn’t address the issue; because the stop only kicks in below the listed market price.
Therefore if I’m looking to sell asap - and market price is 100p - and I put my stop at 95p it won’t trigger until the price drops to 95p. Hence the same problem.
It’s not about guaranteeing shares will sell, that isn’t my expectation.
My expectation is that if a market price is 100p - and I place a sell order, I should be able to specify a price I won’t sell below - because otherwise in illiquid markets I could set my market sell order at 100p but due to illiquidity and spread it may end up selling for 90p and put me at a loss.
The Limit Sell price should be above the current Sell price, otherwise, it will be converted into a [Market Order]"
This is working as it should. It means, if stock price is 100p… and you set limit order for 90p, it will execute immediately, as its UNDER the current price but you shouldnt sell for less that 90p.
Limit orders MUST be placed at a price, HIGHER than current price to go on the order book.
Also note, if using Stop Limit in an illiquid stock, once your stop hits and limit order is engaged, your order will be at the set price, but at the back of the queue of said price.
So best to avoid round numbers… shoot a little under to ensure a fill.
hmmm re-reading your post… think I may have got confused.
So are you saying if using a Stop Limit… and the Limit ends up below the price, it converts to market, ignoring the limit price all together?!
That cant be right.