Trailing Stop Loss


Some, but not all, futures trading platforms and futures brokers offer the ability to enter trailing stop loss orders. This order type initiates a stop loss order which moves incrementally with favorable futures market movement. The parameters of the trailing stop loss order depend on the platform, and the discretion of the trader, but it typically involves some sort of measurement of tick price movement. For example, a trader that is short a futures contract might place a buy stop above the market to protect from losses. If the trader chooses to use a trailing stop loss order, he might instruct the platform to lower the stop by 5 ticks for every 5 ticks the futures price falls. Once the stop loss order is placed, or trailed, it will not back up; thus, if the stop order is trailed twice before the market reverses, it will be triggered at the last trailing stop price (which is 10 ticks lower than the original stop loss price).


One Cancels the Other (OCO)


This is also referred to as a contingency order because it requires that the commodity broker, or futures trading platform, cancel one of your orders should the other be filled. Not all futures brokers are willing to accept this type of order becuase of the risk of something going wrong (whether it be technical error, human error, or simply a fast moving futures market). For example, a trader long December Corn might simultaneously place a limit order above the market as a profit objective, and place a stop loss order beneath the market to limit the exposure to risk of an adverse futures price movement. If these are placed together as an OCO, execution of one of these orders would result in the cancellation of the other. As previously mentioned, if you place this order through your futures broker, he is taking on a substantial amount of responsibility with this type of order and will likely only do so on a full service basis. However, most trading platforms are capable of accepting this commodity order type for electronic execution. As a result, there isn’t nearly as much human intervention involved in OCO orders than was once the case.


The ease and access of OCO orders has greatly improved the convenience of trading commodity futures. Prior to advances in technology in the commodity industry, mis-executed OCO orders created a lot of chaos. Imagine the stress of being long or short a futures contract because the un-filled half of an OCO order wasn’t properly canceled, but was later inadvertently filled.


MIT (Market If Touched)


This order is similar to a stop order in that it becomes a market order once the specified price is "touched". However, it is also similar to a limit order because a sell order is placed above the current futures market price and a buy order is placed beneath the current price. In other words, this is a special type of limit order. Rather than the trader asking for a price or better, the trader simply wants to be filled at the best possible price should the market hit their stated MIT price. A market if touched order in a commodity market avoids the frustration of a limit order hitting the stated price, but going unfilled. However, it also opens the door for some slippage in the fill price.

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