The Art of the Sell | Page 2 of 2 | ETF Trends

Stop limit orders can be used in conjunction with a stop loss so you have, in effect, an order for two prices: the stop loss is the price at which you want to sell, the stop limit is the price below which you will not sell.

For example, your stop loss point can be $25 and if your position hits that price or lower, it will sell. But if you have a stop limit order for $24 in place, your order will only go through as long as the position is between $24 and $25.

The point of a stop limit order is to prevent sudden and unexpected volatility in the markets or certain position from resulting in unintended trades and pricing.

Whatever type of trade you choose to use, you need to watch to ensure that the trades are actually executed, since there’s no guarantee that they will go through. The benefit of limit orders, aside from saving you and your clients money, is that they protect you from volatility in the markets that lead to pricing inefficiencies.

Working the Trade

Once you’ve decided to make the sell, the next question is how and when you’re going to get it through.

Consider the timing of your trade. Avoid doing it at the market open or close, because the spreads tend to be higher while the liquidity is lower. Ditto for when foreign markets are closed.

Also consider the time frame of the execution. Your first option is to have it go through immediately with a market order. But with limits and stops, you can keep the trade open for just the day until it’s executed.

The next option is to use a Good ‘Til Canceled (GTC) order, which means that the order for your trade will be in place until it goes through or you cancel it.

Lastly, there are immediate or cancel orders. That is, if you cannot trade a security at the price you want immediately, the order is canceled.

You should also consider what’s most important to you: price or speed. This will ultimately determine how and when you sell.

For all of the trades, you can do a block trade in which you push all the trades through, then allocate them to the subaccount and do average pricing for all clients.