Terminology, Trading

Difference Between Stop Orders and Market-If-Touched Orders

I noticed that Interactive Brokers have two types of orders that seem to be the same, namely stop orders and market-if-touched orders.

Found a good blog entry (link here) that highlighted the difference. Basically two scenarios

  1. If you are looking to buy
    • If trigger price > current price, use a stop order
    • If trigger price < current price, use a market-if-touched order
  2. If you are looking to sell
    • If trigger price > current price, use a market-if-touched order
    • If trigger price < current price, use a stop order

The same rules above apply for stop limit orders versus limit-if-touched orders.

The idea is that stop orders are typically used to close out positions. Hence if you have a long position, you have a stop sell order when the price goes down, and if you have a short position, you have a stop buy order when the price goes up.

Whereas if-touched orders are used to enter into new positions. Hence if you want to enter a long position at a particular support level, you would put your trigger price near the support level which is below the current market price. Similarly if you want to enter a short position a resistance level, you would put your trigger price near the resistance level which is above the current market price.

For information on more order types, see the following links

-END-

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