How to Use a Step to Limit Order (Stocks)
A Step to Limit order can be used with an order to buy, sell or close a Stock position. The Step to Limit order automatically modifies the order from a selected starting value in the spread toward the Limit maximum selected. Select the starting and ending values for the order and the program does the rest. The idea behind this order is to attempt to get a more favorable fill than the Market price..
1. Click the Buy button on the Chart to initiate the order
Reminder: We will use a buy order for this, but the Step to Market order can also be used to sell or close a position.
2. Select the Buy {Sym}... choice in the menu to initiate a Limit order
This opens an on chart order ticket
3. Click the Limit Basis drop down
Set the Step from field. The Step to Limit order can be initiated from the Bid (on the buy side) or the Mid (midpoint of the bid/ask spread).
Then select "Step to" and set the ending value to which the order would modify.
Step to Mid (will step the order from the Bid to the Mid point (when the order is placed) between the bid and ask.
Step to Ask (or one of the offsets to Ask) will modify the order from the Bid (beginning point) to the point defined by the order (e.g. Ask -.01)
Use the Offset spinner to set the offset seen in the Ask+ or Ask- orders.
4. Place the order
The on-chart order ticket now show the Step to Limit order
Click Buy {Sym} and then Place Order in the confirmation window. Note the Step-to distance is seen in the confirmation ticket.
5. The Step to Limit order will now Auto-Modify
The initial limit order will be placed as specified (in this case at the mid-point of the spread). Then the order will be modified up toward the defined limit maximum (Ask-.01). If the limit price is filled somewhere prior to reaching the limit maximum, you may receive a preferable fill price. If the limit order is not filled, then the order will stop modifying at the Ask-.01 price level as defined by the order.
The trading tools work on either a LIVE brokerage account or a PAPER (simulated) trading account. Live market trading requires an account with TC2000 Brokerage. Click Here for more.
Note: One disadvantage of stepping toward the natural (and/or market price) is that if the market moves against you while stepping, you could get a worse price than if you had just bought at the market initially.