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2 replies on “Simple Trade Management Tip of The Day”
I find that setting closing orders on TOS works for profit situations, but not for loss situations. For example, for a credit trade, we can set a GTC buy trade at the profit target we have set. However, for loss situations, I’ve heard that trades are based on mental notes or alerts, rather than being able to set the trade up on TOS.
True stories: when I placed a STOP MKT GTC trade, the order got filled even as the underlying was moving in my desired direction, causing me to leave a lot of money on the table. When I placed a STOP LIMIT trade, the loss shot past my limit and did not get filled, resulting in a much bigger loss than anticipated.
So, once a trade is placed, what’s the best way to manage the loss side of the equation on TOS that’s not based on mental notes or alerts? This is especially important for those of us who are not based in the US, and are asleep during a large part of the trading day.
Thank you!
Hey Dinesh,
I generally don’t use stops on spreads because you can get really lousy fills at unexpected times as you’ve experienced. I instead set an alert at the short strike and manually enter a closing order at that time. But because you’re asleep during our market hours, if you have to use a stop, just make sure you use a regular stop (not stop limit) and only trade options with VERY tight bid-ask spreads.