ACDX supports two kinds of triggerable orders: stops and and take profits.
These are orders that aren't added to the order book until some price threshold is reached.
1. Stop Market / Limit
A stop market or stop limit order is an instruction to add a market or limit order to the book once the trigger price has crossed the stop price. By default, the stop price indicates the mark price at which to trigger the stop, but stops may also be configured to trigger on last trade price or underlying index price rather than mark price.
Stop orders rest in the matching engine until the trigger price goes 'outside' the stop price:
- Buy - the stop triggers when the trigger price is greater than or equal to the stop price
- Sell - the stop triggers when the trigger price is less than or equal to the stop price
Upon triggering, the stop order is converted to a regular market or limit order. This order becomes available for execution in the first auction following the one which triggered the stop. The order will incur the standard fees, as any order inserted at the time of the trigger would.
While it is untriggered, a stop order is invisible to other traders, and is not included in the book. Once it is triggered it becomes visible (as it is now a normal market or limit order).
Note that the time priority of the order is based on the time at which it was triggered, rather than the time at which the stop was last updated.
A stop market order may be specified with either a fixed or percentage trail value, which causes the stop price to be pegged to no more than a fixed offset away from the order's trigger price (which is a mark price, index price, or last trade price, depending on the order's specified trigger type).
When the trigger price moves away from the current stop price, the stop price is moved as well, thus the stop price trails the trigger price. (Note however that when the trigger price moves towards the current stop price, the stop price doesn't change, otherwise the order would never trigger.)
For example, on a stop market sell order, setting a $-100 trail value will have the effect of setting the stop price $100 below the trigger price. If the trigger price is $1000 at the time the order is entered, the stop price will be $900. If the trigger price moves up to $1050, the stop price will be updated to $950. If the trigger price then moves down to $990, the stop price will stay at $950, and if the trigger price keeps moving all the way down to $950, the order will be triggered, and will convert to a normal market sell.
In other words, the stop price of a stop sell order will move up along with the market, but is kept constant as the price falls towards the stop (and vice-versa for a stop buy order).
2. Take Profit Market / Limit
A take market or take limit order is the same as a stop market or limit order, but with the trigger directions reversed. That is:
- buy - the take profit order triggers when the trigger price is less than or equal to the stop price
- sell - the take profit order triggers when the trigger price is greater than or equal to the stop price