Take Profit & Stop Loss Orders (TP/SL)

Overview

Take Profit (TP) and Stop Loss (SL) orders are essential risk management tools that allow traders to automatically close a position once it reaches a certain level of unrealized profit or loss.

On Bulk Exchange, all TP/SL orders are triggered by the Mark Price. This ensures that orders are triggered based on the fair, manipulation-resistant value of the contract, rather than the last traded price which can be more volatile.

Market vs. Limit TP/SL Orders

Traders can choose between two types of TP/SL orders, each offering a different balance between execution certainty and price control.

• TP/SL Market Order: When the Mark Price reaches your specified trigger price, a market order is immediately sent to the order book. This type of order prioritizes execution and is highly likely to be filled, but it may be subject to slippage, especially in fast-moving or illiquid markets.

• TP/SL Limit Order: When the Mark Price reaches your trigger price, a limit order is placed on the order book at a limit price you define. This gives you control over the worst price you are willing to accept.

  • Benefit: Protects against excessive slippage.

  • Risk: The order is not guaranteed to fill. If the market moves rapidly past your limit price, your order may be left unfilled on the book, and your position will remain open.

Example: Imagine you have a long position and set a Stop Loss trigger at $100.

• If you set a limit price of $99, your sell order will be placed when the Mark Price hits $100, but it will only fill at a price of $99 or better. If the market gaps down instantly to $98, your order might not fill.

• If you set a more aggressive limit price of $98, your order is more likely to be filled in the above scenario, but you accept a lower execution price.

Attaching TP/SL to an Existing Position

This is the most straightforward way to use TP/SL. You can add TP and/or SL orders directly to a position you already hold. By default, these orders are set to close the entire position. If the position size changes after the TP/SL is set, the order will still attempt to close the full position size at the time of triggering.

Attaching TP/SL to a Parent Order (OCO - One-Cancels-Other)

This advanced feature allows you to place TP and SL orders that are linked to a parent order (e.g., a limit order to open a new position). The logic for this is more complex.

• Untriggered State: When you place a limit order with attached TP/SL orders, the TP/SL orders are not active yet. They exist in an "untriggered" state, linked to the parent order.

• Cancellation: If you cancel the parent order before it is filled, the linked TP/SL orders are also automatically canceled. If the parent order is partially filled and then you cancel it, the linked TP/SL orders are also canceled. You would need to manually create new TP/SL orders for the partially filled position.

• Full Fill: If the parent order is fully filled, the linked TP and SL orders are immediately activated and attached to the newly created position.

• Margin Cancellation: A special case exists if a partially filled parent order is automatically canceled by the system due to insufficient margin. In this scenario, the TP/SL orders will be placed for the size that was filled.

In summary, child TP/SL orders linked to a parent order are only activated if the parent order either fills completely or is partially filled and then canceled due to a margin issue.