Execution
Order types, and why your stop did not do what you expected
Four order types cover almost everything a discretionary futures trader places, and the differences between them only become visible on the days you least want a surprise. Here is what each one promises, and what it does not.
The four, and what each guarantees
Every order type is a trade between two things you cannot have at once: certainty that you get filled, and certainty about the price.
| Order | Guarantees | Does not guarantee |
|---|---|---|
| Market | That you get filled, as long as there is a market. | The price. In a fast market it can be materially worse than the one you saw. |
| Limit | Your price or better. | That it fills at all. Price can touch your limit and leave without you if the queue ahead of you absorbed it. |
| Stop market | That you are out once the trigger trades. | The exit price. On the trigger it becomes a market order. |
| Stop limit | That you never exit worse than your limit. | That you exit. If price runs past the limit, the order stays working and the position stays open. |
That last row is the one that hurts. A stop limit placed to avoid a bad fill can leave you holding a losing position while price keeps going, which is the exact scenario the stop existed to prevent. It converts an unknown-size loss into a possibly much larger one in exchange for protection against slippage. For a protective stop, that is usually the wrong side of the trade to be on.
Slippage is not a malfunction
A stop market order fills at the best price available when it triggers. If the book is thin at that moment, that price can be several ticks past your trigger. Nothing has gone wrong. You asked to be out, and out is what you got.
It is worth knowing what this costs you in money rather than ticks. Two ticks of slippage on ES is $25 a contract, on NQ it is $10, and on crude it is $20. Multiply by how often you are stopped out and it stops being a rounding error. The tick value guide has the figures for twelve contracts.
Where the trigger sits matters
A stop is triggered by price trading at your level, so a stop placed exactly at an obvious number is a stop placed where a great many other stops already are. That is not a conspiracy, it is just liquidity: a cluster of resting stops is a pool of market orders waiting to fire, and pools like that get reached.
The mechanical point, separate from any view about how to trade: your stop should sit where the idea is wrong, not where the round number is. If those are the same place, the stop needs more room, which means fewer contracts. That is what the position size calculator is for.
Bracket orders and the one thing to check
Most platforms let you attach a stop and a target to an entry so all three go in together. This is worth using, for a reason that has nothing to do with the orders themselves: it removes the moment between getting filled and deciding on a stop, and that moment is where a planned trade turns into an unplanned one.
The thing to verify is what happens when one side fills. The two exits should be linked so that filling one cancels the other. If they are not, a target fill can leave a live stop order behind, which is now not a stop at all but an order to open a fresh position in the opposite direction.
Check this on a simulated account, not a live one. Every claim above is about how orders behave, and behaviour is testable. Place the orders, fill them, and watch what your platform actually does with the other side. It takes ten minutes and it is worth more than reading about it, this page included.
Then what
The execution side of your results is visible in your own exports. A loss materially larger than your usual one on the same instrument is either a stop that was not there, a stop that was moved, or slippage. The Trade Lab flags the first two by comparing each loss against your typical stop for that instrument.
Related guides
Position sizing against a drawdown limit
On an evaluation account the balance is not what ends you. A floor is, and it sits closer than the balance suggests.
Contract mechanicsWhat a tick is actually worth
Tick size, tick value and point value are three numbers people use as one. Each of them, for twelve contracts.