Trade Trigger

What is a Trade Trigger?

A trade trigger is any event that meets the criteria to start an automated securities transaction that doesn't need extra trader input. A trade trigger is typically a market condition, for example, a rise or fall in the price of an index or security, which triggers a sequence of trades. Trade triggers are utilized to robotize certain types of trades, for example, the selling of shares when the price arrives at a certain level.

Understanding Trade Trigger

Trade triggers assist traders with robotizing their entry and exit strategies. Frequently, trade triggers are placed utilizing contingent orders including both a primary and secondary order. At the point when the principal order executes, the subsequent order is triggered automatically and becomes active for execution relying upon any further conditions.

Trade triggers may likewise be utilized to place individual trades in light of the price or outside factors. For instance, traders can straddle the current market price by putting a one-cancels-other (OCO) order, by which the execution of one side will promptly cancel the other, subsequently permitting the trader entry to the market, ideally toward the path with momentum.

Trade Trigger Example

Assume that a trader needs to make a covered call position. The trader might place a limit order to buy 100 shares of stock and, in the event that the trade executes, sell a call option against the stock that was just purchased. By utilizing trade triggers, the trader doesn't need to worry about looking for the principal order before physically putting the subsequent trade. The trader can be sure that the two orders were placed at the right prices.

Traders may likewise need to utilize the proceeds from a sale to make a purchase. For instance, a trader might place a limit order to close out an option position and set up a trade trigger to utilize the proceeds to purchase an alternate option contract. The trader doesn't need to worry about the timing of the subsequent trade and can rather zero in on distinguishing new opportunities.

At last, trade triggers might be utilized to add a leg to a strategy. For instance, a trader might place a limit order to buy a put and have a contingent limit order to sell a put. This strategy can assist traders with formulating a complex options strategy without executing individual trades, which diminishes the risk of putting some unacceptable trades or waiting too long to open or change a trade.

Trade Trigger Pros and Cons

Trade triggers might be useful in robotizing entry and exit strategies, yet traders ought to exercise alert while utilizing them. All things considered, it's simple for traders to disregard positions made over a day prior and the execution of old trading thoughts can lead to losses.

Traders ought to make certain to return to any open trade triggers toward the finish of every day and consider just utilizing day-long orders for setting up these strategies instead of good-till-canceled or other longer time span order types.

By prudence of carrying out rules recognized by the trader, trade triggers can add a discipline part to the trading system. Frequently, traders will utilize trade triggers to place compound orders that depend on a series of conditions to be met. Traders ought to guarantee that their trade triggers stay applicable after some time.

Features

• By excellence of carrying out rules recognized by the trader, trade triggers can add a discipline part to the trading system.
• A trade trigger is any event that meets the criteria to start an automated securities transaction that doesn't need extra input.
• Frequently, trade triggers are placed utilizing contingent orders including both a primary and secondary order.