Trailing Stop-on-Quote Orders
A trailing stop-on-quote order, also called a trailing stop-loss order, is a stop order where the stop price adjusts by a given percent or point (dollar) amount. This order type can provide additional potential for you to lock in gains, while still protecting yourself from the investment's downside. The stop price can automatically adjust based on the last price for the security. For sell orders, the execution is triggered by the bid price. For buy orders, the execution is triggered by the ask price. Once the stop price has triggered, a market order to buy/sell is sent to the market. Keep in mind that with any stop order the execution price can be different than your trigger price due to market volatility.
Trailing Stop-on-Quote Scenario
If you own XYZ stock at $20/share, and decide you would like to sell your shares if the stock was to drop $2, you could set a trailing stop-on-quote order to automatically sell if XYZ goes down. If XYZ’s bid drops by $2/share, the trailing stop-on-quote order is triggered if the bid is $18 ($20 - $2) or lower, the order will be placed as a market order.
If XYZ’s last price goes up, the trigger price for the trailing stop-on-quote also goes up. For example, if XYZ stock increases to $25/share, a trailing stop-on-quote order will be triggered if the last price drops and the bid comes down to $23 ($25 - $2) or less.
A stop on quote order does not guarantee an execution price equal to the stop on quote price. The price of a security may move significantly during volatile markets and may trigger a stop on quote order resulting in the execution at a price substantially different than the stop on quote price.
A trailing stop-on-quote order is similar to a stop-on-quote order, but instead of a stop price, you are able to set a stop condition, creating a moving ("trailing") activation price. You can enter a stop condition in points or by percentage. Scottrade holds your trailing stop-on-quote order on our servers on a "not held, best-efforts basis"; this means that we do not deliver your order to a market center until your stop condition is met.
If your stop condition is met, we will send your order as a market order. Like a regular stop-on-quote order, your order may not be filled at your stop price, especially in certain fast market conditions.