Ask, Bid and spread in relation with stop order

[ezraluandre]

Hi I'd like to ask about ask, bid and spread. In general I know what those words mean but there are things I want to clarify.

example, at current bar
ask = 1.06200
bid = 1.06190
spread = 10

If I open long position at current market price then I will open at the ask price and when I want to open short position I will open at the bid price.
What If I want to open not at market price but open it using stop order?

let's say that I want to open long position at 1.06195 (5 point below ask price), does the trade would return error or metatrader will accept it but not filled it until ask price comes down and goes beyond that price?

 

[Enivid]

Hi I'd like to ask about ask, bid and spread. In general I know what those words mean but there are things I want to clarify.

example, at current bar
ask = 1.06200
bid = 1.06190
spread = 10

If I open long position at current market price then I will open at the ask price and when I want to open short position I will open at the bid price.
What If I want to open not at market price but open it using stop order?

let's say that I want to open long position at 1.06195 (5 point below ask price), does the trade would return error or metatrader will accept it but not filled it until ask price comes down and goes beyond that price?

In MetaTrader, there is a minimum distance between the current price and the open price for stop and limit orders. An order with an open price within the Bid/Ask range will be rejected.

 

[ezraluandre]

So, with the same spread above, If I want to open trade at last closed bar which is 1.06200 and current bar open is the same then I can't open long position because it will rejected, is this correct?

 

[Enivid]

So, with the same spread above, If I want to open trade at last closed bar which is 1.06200 and current bar open is the same then I can't open long position because it will rejected, is this correct?

You can use a market order for that, but not a pending order. For a pending order, you'd have to wait for the price to retrace.

 

[ezraluandre]

thank you for clarifying it Enivid

 

[voneberbach]

This was useful for me too! Thanks a lot!

 

[fargana]

Hi I'd like to ask about ask, bid and spread. In general I know what those words mean but there are things I want to clarify.

example, at current bar
ask = 1.06200
bid = 1.06190
spread = 10

If I open long position at current market price then I will open at the ask price and when I want to open short position I will open at the bid price.
What If I want to open not at market price but open it using stop order?

let's say that I want to open long position at 1.06195 (5 point below ask price), does the trade would return error or metatrader will accept it but not filled it until ask price comes down and goes beyond that price?

Post automatically merged: Jan 16, 2023

When the bid price drops to 1.06195, stop order will be triggered and the trade will be executed at price 1.06195+spread (i.e. ask price at that time)

 

[Enivid]

Post automatically merged: Jan 16, 2023

When the bid price drops to 1.06195, stop order will be triggered and the trade will be executed at price 1.06195+spread (i.e. ask price at that time)

@ezraluandre asked about the situation when the Bid ask is already below the desired price. However, the bid price is totally irrelevant here as the question is about a Buy order, which executes at Ask.

 

[fargana]

@ezraluandre asked about the situation when the Bid ask is already below the desired price. However, the bid price is totally irrelevant here as the question is about a Buy order, which executes at Ask.

Ask price mentioned isn't below the specified price ( 1.06200 and 1.06195). As far as I know brokers use bid price as the reference price for stop orders. Regarding this situation I guess OP talks about stop limit order, so when the bid price hits 1.06195 the order becomes market as is executed at the ask price which is 1.06195 + spread. Also keep in mind OP that many brokers set min threshold in pips for such orders.

 

[Enivid]

Ask price mentioned isn't below the specified price ( 1.06200 and 1.06195).

And?

As far as I know brokers use bid price as the reference price for stop orders.

That's true only for Sell orders, but why are you mentioning it?

 

[Haruto]

Be cautious about trading spread issue because high spread will consume your earning. So, trade in low spread-consuming pairs so you can be profitable.

 

[Marco877]

Spread lies between the ask and bid price, indirectly referring to commission taken by brokers. The lower the spread is, the higher the profit margin is.

 

[Digital Rahul]

The buyer of the transaction determines the ideal price. This is the asking price, or the highest price a buyer will pay for a commodity. According to the logic of the rule of supply and demand, the buyer does not want to purchase expensive goods.

The Ask price is established by the trader who sells. The asking price, also known as the offer price or lowest price at which the seller is ready to sell a security, is known as the ask. The vendor wants to fetch a higher fee for it.

When a stock reaches a specific price, known as the stop or trigger price, a stop order tells the broker to start a trade. For instance, a purchase stop order would be activated when the stock increased to a specific price, and a sell stop order would be activated when the stock decreased to a specific price.

Because stop orders become market orders when they are activated, they can be dangerous in choppy markets. If prices are moving quickly, the buyer may end up paying substantially more than the stop price by the time the transaction is carried out, while the seller may receive a price substantially lower than the stop price.