MT4 Stop Orders

[martinrue]

I'm not familiar with the underlying protocol between the broker and MT4, but I was wondering what happens when you place an order with a stop using MT4.

Does the order get placed with the broker, along with the stop order – meaning that the broker executes the stop order, or does the stop get applied locally in MT4? In other words, does the broker 'see' the stop order?

I assume it goes with the original order, since otherwise closing MT4 would mean your stop order wouldn't execute.

On the other hand, I suppose that means people worried about their broker stopping them out could write an EA to apply stop orders locally, so the broker never sees it?

Thanks,

Martin

 

[alex2006]

First of all, stop order placed in MT4 will be on the server. Whether the MT4 client is running or not, it doesn't matter.

Indeed, brokers see your stop orders. Whether they hunt your stops, it totally depends on ethics of the broker. Reputable brokers don't hunt your stops.

It's a good idea to code stops in EA, but not without risk, such as PC crash, power outage etc.

I usual place stops over 100 pips away therefore small spikes won't touch it. Unusual spikes can be argued with broker if they happen.

One of an ECN brokers I am trading with has a really thoughtful policy.

"We currently employ the following behavior for Stop Loss (S/L) and Take Profit (T/P) items. If you have only a S/L, the bridge monitors the positions and waits for the price to hit, then sends a market order to our router. If you have only a T/P, the bridge sends a Limit order, which will display to the market in the quote, to the ECN, which awaits execution. You would be paid for this execution under our Get Paid for Limit Orders system. If you have both a S/L and a T/P, the system sends the T/P to the ECN as a Limit order, which will display to the market in the quote. If that order is filled, the trade is closed. If the S/L price hits instead, the system cancels the Limit order for the T/P and then sends a market order to close."

I like it very much because in theory, in the market ladder, all participants see my T/P order sitting therefore can hit it if whey wish but they don't see my stop order, provided the broker doesn't manipulate quotes for their benefit.

 

[martinrue]

Thanks Alex, really detailed answer – appreciate it. Out of interest, which ECN broker is it with the policy you mentioned?

 

[pboyles]

"We currently employ the following behavior for Stop Loss (S/L) and Take Profit (T/P) items. If you have only a S/L, the bridge monitors the positions and waits for the price to hit, then sends a market order to our router. If you have only a T/P, the bridge sends a Limit order, which will display to the market in the quote, to the ECN, which awaits execution. You would be paid for this execution under our Get Paid for Limit Orders system. If you have both a S/L and a T/P, the system sends the T/P to the ECN as a Limit order, which will display to the market in the quote. If that order is filled, the trade is closed. If the S/L price hits instead, the system cancels the Limit order for the T/P and then sends a market order to close."

I like it very much because in theory, in the market ladder, all participants see my T/P order sitting therefore can hit it if whey wish but they don't see my stop order, provided the broker doesn't manipulate quotes for their benefit.

I think what they are actually doing is setting you up for some negative slippage (executing you SL at the market) and no positive slippage (TP on a limit order which will miraculously always be executed at the exact price)

 

[alex2006]

I think what they are actually doing is setting you up for some negative slippage (executing you SL at the market) and no positive slippage (TP on a limit order which will miraculously always be executed at the exact price)

Nope. As I mentioned in another post, I found most my T/P orders are filled at better prices, if not at the T/P prices. They slip in my favour. S/L orders can slip in their favour, if not at S/L prices. In short, the broker is in a neutral position.

My understanding is that T/P orders are filled when the market moves in my favour anyway therefore are executed at better prices very often in real ECN environment because of slippage, and vice versa.

Luckily I don't usually get filled at SL prices

An example this morning:

During Asia-Pacific session, I shorted eurusd at 1.35042 with T/P limit at support level 1.34861. But the support was broken before the T/P limit. Order was filled at 1.34726.

 

[alex2006]

Thanks Alex, really detailed answer – appreciate it. Out of interest, which ECN broker is it with the policy you mentioned?

You may google the quoted policy.