simplified-FX-stop-orders-may-2016

Title: Simplified FX Stop Orders
Page Content:

​FX Stop orders will be simplified on May 17th in the SaxoTrader platform, where 'Stop if Bid’ sell and ‘Stop if Offered’ buy orders will be removed and replaced with a single ‘Stop’ order that will automatically trigger on the appropriate side.

 

Existing Stop if Bid and Stop if Offered orders will not be immediately affected but on Saturday June 11th they will be converted to the new stop order convention:

  • Stop if Bid sell orders will be converted to Stop if Offer
  • Stop if Offer buy orders will be converted to Stop If Bid

Note that the client order level will stay the same. 

Triggering Stop Orders

Stop orders will be triggered using institutional practices where:

  • Buy orders will be triggered on the Bid price
  • Sell orders will be triggered on the Offer price

This has long been the convention in institutional trading as it eliminates spread effects from strategies where trades can be prematurely triggered from a sudden widening of the Bid/Ask spread during volatile market conditions.

This convention is already used in the SaxoTraderGO platform.

Stop Order Fills

When Stop orders are triggered, they become market orders and filled at the best available price in the market at the time:

  • Buy orders will be filled on the Offer price
  • Sell orders will be filled on the Bid price

It is important to understand that triggering an order on the opposite side of the spread is not slippage; it is a way for clients to trade at a price only when there are other legitimate buyers or sellers active in the market as a way to avoid triggering due to temporary spread widening. Spot orders always become market orders when triggered and are filled at the market price, however market spreads are not something in a broker's control.

Transparency

We value transparency and publish our stop order statistics on our website which testify to Saxo Bank’s consistently good execution.

Example - what happens when the spread widens

As a typical example, if you have a long EURUSD position opened at 1.0970 and the subsequent series of price ticks look like this:

 

In this scenario, if a sell stop if bid order was placed at 1.0950, you would have prematurely been taken out of your position.

But the market has not actually traded at that level, the mid-price has not moved yet due to a temporary widening of the spread, the stop will be triggered and you will be taken out of your position. Shortly afterwards the spread narrows again and the price moves in your favour but your position has already been closed by the spurious spread.

If the sell stop is triggered on the ask price at 1.0950 instead, the order would first be filled when there is actually a market at 1.0950 (i.e. when there is a buyer) and when the offer price is 1.0950.

Historic Spreads

We also encourage you to look at our Historic Spreads utility which offers transparency into Saxo Bank’s minimum and average spreads by currency, amount and trading session.

Historic Spreads

Saxo Capital Markets (Australia) Pty Ltd.
Level 25, 2 Park Street
NSW 2000
Sydney
Australia

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