Monday, November 07, 2005

Who Knew We Offered So Many Different Order Types?

Now’s a great time to be an online futures trader, and one reason is the ever-expanding selection of special orders that give you more convenience and control. In addition to all the conventional order types, more and more online futures brokers have begun to offer a wide range of advanced and contingent orders. Let’s look at a just a few of the special orders now available at various online futures brokers:

One-Triggers-Others: Suppose you’ve identified a head-and-shoulders pattern in the crude oil market, and accordingly, you enter a limit order to go short at $62. You’re looking for an objective in the low-to-mid $50s, and you see strong resistance around $66. Accordingly, you place three trades, all on a single order entry screen you enter the primary limit order to sell at $62, a contingent limit order to take profits at $54, and a contingent stop order at $66 for protection. There’s no need for you to sit in front of your computer all day once the primary order’s been filled, both contingent orders will be activated automatically. Many trading platforms even allow you to specify that if either contingent order is executed, the other should be cancelled.

Trailing Stops: You’ve done your homework, you know that oat futures can lead significant grain market rallies, and the solid upturn in oats futures might be an early clue that harvest lows are close at hand. You place a limit order to buy December oats at $1.64, a contingent limit order to take profits at $1.85, and a contingent trailing stop $.05 below the market, since a nickel is the most you’re willing to risk on this trade. If your primary order is executed, both contingents activate.

Think of the market and the trailing stop as being linked by an imaginary chain. When the market moves in your favor, the chain tightens, and the trailing stop is dragged along automatically. When the market moves against you, however, slack builds in the chain, and the price on your trailing stop remains unchanged. This special order type allows you to profit from favorable movement in the market while having the protection of a stop order. And it frees you from having to constantly monitor the market and repetitively modify your stop order.

Alert-Triggered-Orders: Some futures brokers have taken price alerts to the next level. Not only can you set up their trading systems to notify you by e-mail when an alert has been triggered you also can attach an order to your price alert, and when the market reaches your target, the order will be automatically activated. Here’s an example: Silver futures have been strong and are now trading around $7.84. But the 14-day RSI indicates seriously overbought conditions, and momentum appears to be fading. You feel that penetrating the $8.00 level will be difficult. Thus, you enter an Alert-Triggered-Order. If December silver futures reach $7.92, you'd like a market order to sell 10 December $8.25 call options to be automatically entered on your behalf. Click Here To See All Order Types....