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Let's say that ABC is at $1.10 and my desired entry point is $1. I send a buy limit at $1. The price drops and that order is filled. Next a 2% trailing stop loss is entered that will only be activated if the price rises to, say $1.20. The price reaches $1.20 and the TSL is activated. The price climbs to $1.30 then drops to by 2%, triggering a market sell order.

The idea is to not leave money on the table if the price gains momentum.

Does this exist / make sense?

  • If your goal is to limit your losses, I should point out that there are cases where the market price falls so fast that your 2% limit gets blown past, for example when news hits while the markets are closed, and your sell at a 50% loss instead of your 2% limit. – Glen Pierce May 25 at 4:39
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Yes it does exist, but I haven't seen it very often. A friend told me his broker in Australia (CMC Markets) has introduced such an order about six months ago.

He said it was a Profit Target Trailing Stop Loss order, and would only hit the market once your profit target was reached.

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Does this exist?

There are a few aspects you need to consider.

First, there is a difference between order types offered by your broker and order types offered by the exchange.

If an order type is offered by the exchange, it means that the order can be delivered as such to the exchange and will be executed from the exchange systems directly.

For all other order types, you or the broker has to simulate them. This means that only that portion of the order that is supported by the exchange gets transferred there, the rest happens on the systems of the broker.

Simple example: the exchange supports only MKT and LMT but no stop orders. So, in case of a stop limit order, the order would stay on the broker's system until the stop was reached, then the limit order would be transferred to the exchange for execution.

There is one important caveat here: an exchange might not only not support certain order, they might outright forbid them.

Why is all of this relevant for you? Because even if your broker would not offer the kind of order you seek (which would usually be called conditional stop or adjustable stop order, or similar), many online brokers allow you to create your own algorithms (either within their own software, via API control, or using third party software such as MetaTrader). You just have to make sure your algorithm wouldn't create (detectable) orders which are not allowed by the exchange.

Does this make sense?

Sure it does. Is it a sure fire way to be profitable, though? No, it's not.

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This may or may not be considered an answer depending on your definition of platform.

Interactive Brokers (and many others) provide a very robust API for users to program their own market analysis and trade execution engines in a variety of environments ranging from Excel to C to Python and beyond. With this level of freedom, you could design any type of trade system you could imagine. In this scenario, the system that you described is trivially easy to build for someone with the relevant skills.

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