Introducing Stop-Limit Orders

Introducing Stop-Limit Orders

by Virtuse Admin
29. August 2020
Introducing Stop-Limit Orders

Today we are excited to announce support for Stop-Limit orders

Stop-Limit orders are typically used by traders to help manage risk and are common in marketplaces for traditional asset classes. Stop-Limit orders give traders more control over order execution and trading strategies. 

Starting August 28th, you can place buy or sell Stop-Limit orders on all order books using the Virtuse interface, as well as our REST order entry APIs.

How do Stop-Limit orders work?

A Stop-Limit order has a Stop Price, a Side, and a Limit Price. When the Last Trade Price crosses the Stop Price on either the order book, a Limit order will be placed on the Side at the Limit Price associated with the order.

Example 1: Protecting a BTC Position

Let’s say David bought 0.1 BTC when the BTC/PAX market was trading at $12,000 on Virtuse. David wants to protect his trade from potential loss in the event the BTC/PAX market price declines. 

He might enter an order like this:

  • Order Type: Stop-Limit
  • Quantity: 0.1 BTC
  • Side: Sell
  • Stop Price: $11,000.00
  • Limit Price: $10,500.00

Once this Stop-Limit order has been placed, he can view his order in the Open Orders table in his Virtuse interface. In the event the market price declines from $12,000 to $11,000, a Limit sell 0.1 BTC at $10,500.00 order will be placed on the BTC/PAX order book.

Because that order is placed when the market crosses $11,000, David’s order will get filled at or above his Limit Price of $10,500 depending on the liquidity on the BTC/PAX order book at that time.

The Limit Price of the order protects David from selling his position at a price less than he intended (i.e., $10,500).

The benefit of placing a Stop-Limit order in this example is that the Limit sell order is automatically placed when the Stop Price is triggered. 

Order placement that is conditional on market price means you don’t have to be in front of a screen at the time the order is placed.

Example 2: Entering a BTC Position

This is an example of using a Stop-Limit order as part of a trading strategy involving resistance levels.

Let’s say the BTC/PAX market is trading at $12,000. David wants to buy BTC, but he only wants to buy in the event of an uptrend, after the market price exceeds a resistance level of $12,500. 

David may enter an order like this:

  • Order Type: Stop-Limit
  • Quantity: 0.1 BTC
  • Side: Buy
  • Stop Price: $12,500.00
  • Limit Price: $13,000.00

David is not exposed to downside risk associated with holding the BTC position before this resistance level has been exceeded.

Share this article:

divider graphic

Related Articles

Subscribe to Virtuse News
graphical divider
arrow-up icon