Stop-limit order | How to set the limit | Coinbase Pro - GDAX

Key Takeaways

in the previous video we learned that the stop order is triggered by the last price in this video we're gonna take a look at how we can use this information to place our stop orders limit price let's have a look looking in our open orders we can see that we have one order currently open we see that the stop price is 4,000 the limit price is also 4,000 now one thing to note about this order is that this order is not on the order book if we look at the order book we can see just here at 4,000 nothing's there because this order is not on the order book the current situation or what we have we have code on the GX back-end that is monitoring the price of Bitcoin so that code has a trigger price and it's waiting monitoring the price when it sees the condition is true it's going to issue a limit order on our behalf the limit order is gonna have a limit price of 4,000 now what we have just learned is that the actual price that's going to trigger this order it's going to be the last trade price looking over in the trade history that is gonna be the price every time a trade occurs there's a new last trade price that's the price that's being monitored so when that price hits 4,000 or lower GX is going to issue in order for us our limit order this information can help us make a decision on choosing our actual limit price because we know that the market price the price that we can get doesn't necessarily have to be the same as the last trade price and often it is not the same as the last trade price we talked about in a previous video that the spread or the actual market price that you can get can move around without having trades occur now that has really strong implications for our limit order that will be placed at the time that the trigger price is reached this is because the market price can lead the last trade price now the last trade price is in the trade history and it is just that it is history the current actual price in the market is moving faster than the last trade price this means that by the time our trigger is hit the price will probably be lower than 4-thousand when our order hits the order book this means that we're gonna have a limit order with a limit price of 4000 and the market price is going to be below 4000 which means our order is not going to get filled that's the warning that we got whenever we actually submitted this order and we talked about that in a previous video they said the order may not execute immediately this is bad because we want to actually stop our loss that was the intended purpose of placing this order we wanted to stop our loss at a particular price how can we remedy this situation given the current information that we have to remedy this situation always leave a gap in between our stock price or a trigger price and the actual limit the price that we're willing to pay cancelled our current order and we're gonna create a new order in such a way that we can mitigate this problem but we can increase our chances of not getting stuck on the order book when we actually want to fill so let's look at the order entry panel just on the Left we have a current price just to get rid of that and we're gonna fill all and we have a stop price of 4,000 this is our trigger price so when the last trade is at or below 4,000 an order is gonna be created for us now this set programming aspect of this particular order type we are programming GDX we're saying GDX we want you to do this for us in a programmatic way we don't want to have to enter this order for ourselves the alternative would be we just watch and monitor the price ourself and then when the price gets down to 4,000 we'd say we want to get out let's place a limit order but instead we're gonna be able to program GX to say do this for us if the price reaches 4,000 or lower but what we want to do is mitigate the chances that we get stuck on the order book because we definitely want to get out we want to get an execution to what we need to do is create a gap now the larger the gap the lower the prices that you might potentially get the smaller the gap the higher the chance is that you actually get stuck on the order book and you don't get an execution picking this is just really up to you you want to pick something that you're comfortable with you want to put your stock price a little higher than what you actually want say 4,000 you might put your stock price at 4050 or 4,100 just to guarantee that you get out at 4000 I'm gonna say that I'm fine with 39 50 being the price that I actually get out at so we're gonna create a gap of 50 dollars and if you want to you can set some kind of threshold for yourself like a percentage or something like that one other thing that you might be thinking is why I deal with this limit price at all why not just deal with the market price and not even you know select this limit price you could do that but the reason you don't want to is because with this limit price you're protecting yourself if for sample a flash crash happens because when you specify market if you didn't put the limit price then you're effectively telling gtex I will take any price that's available it could be $0.10 and if G Dax if that's the only price that's available at the time if a flash crust were occurring then G Dax would fulfill that order at $0.10 so you want to protect yourself you don't want to just say I'll take any price you always want to specify your price and that's why we're doing that here and we want to make sure that we can get out we can get an execution so we want to have a gap in between the price worth where our order gets triggered in the actual limit price that we're willing to pay so now we have a $50 gap and it's very likely that when Bitcoin when the last price trades at 4,000 are lower there's probably still going to be some bids above our 3950 that we will be able to hit so let's go ahead and click sell and we get the warning again this order may not feel immediately when executed the way we have set this up it's very likely that this will feel immediately when executed so let's place order and now we have our order on the order book we can see we have a stop price this is the programmed price of 4,000 that's the trigger and we had the price the limit price of thirty nine point four less than thirty nine fifty and we know that our trigger at four thousand if Bitcoin goes to four thousand then our order is going to be created and this is how you should use a stop order to protect yourself using the limit price hope this video was helpful please like the video subscribe and support this deep lizard Channel thank you