TradeStation Order Types Guide for Day Traders

In the fast-paced world of day trading, mastering order types is essential to executing strategies with precision and managing risk effectively. Different order types allow traders to control entry and exit points, automate trades under certain conditions, and respond quickly to volatile market movements. This guide explores advanced order types commonly available on professional trading platforms, focusing on how day traders can leverage them to optimize trade execution and enhance profitability.

Understanding Basic vs. Advanced Order Types

Before diving into advanced order types, it’s important to differentiate them from basic orders:

• Market Orders: Execute immediately at the best available price.
• Limit Orders: Set a maximum purchase price or minimum sale price.
• Stop Orders: Trigger a market order once a specified price level is reached.

While these are foundational tools, advanced orders combine or add conditions that allow for sophisticated execution strategies. Examples include stop-limit orders, trailing stops, OCO (One-Cancels-the-Other), and bracket orders. These are invaluable for managing risk dynamically and automating exit strategies without constant monitoring.

Stop-Limit and Stop-Market Orders: Precision in Entry and Exit

Stop orders are critical for protecting profits and limiting losses, but knowing when to use stop-limit versus stop-market can greatly impact trade outcomes.

• Stop-Market Orders: Once the stop price is triggered, a market order executes immediately. This guarantees execution but not price, which can lead to slippage, especially in volatile markets.
• Stop-Limit Orders: After the stop price triggers, a limit order is placed at a specified price. This can prevent slippage but risks non-execution if the limit price is not met.

Example: Suppose you hold a stock at $50 and want to limit losses to 5%. You set a stop-limit order with a stop price of $47.50 and a limit price of $47.40. If the price dips to $47.50, the limit order triggers but will only execute if shares can be sold at $47.40 or better. If the price gaps down to $47.30, your order may not fill, exposing you to further losses.

Actionable tip: Use stop-market orders in highly liquid stocks or during active market hours for guaranteed execution. Use stop-limit orders when you want control over the execution price and can tolerate some risk of non-fill.

Trailing Stops: Locking in Gains While Allowing Upside

Trailing stop orders automatically adjust the stop price as the market price moves favorably, helping lock in profits while giving the trade room to grow.

• Fixed Dollar Trailing Stop: Sets the stop price a fixed dollar amount below (for longs) or above (for shorts) the market price.
• Percentage Trailing Stop: Sets the stop price a fixed percentage away from the market price.

Example: You buy a stock at $100 and set a trailing stop loss 2% below market price. If the price rises to $110, the stop moves up to $107.80 (2% below $110). If the price then falls to $107.80, the trailing stop triggers and sells your position, securing most of your gains.

Step-by-step for setting a trailing stop:

1. Determine the acceptable trailing distance based on volatility (e.g., 1.5%–3% for a volatile stock).
2. Select trailing stop type (dollar or percentage).
3. Input the trailing amount or percentage.
4. Confirm order parameters and submit.

Pro tip: Use Average True Range (ATR) to calculate an optimal trailing stop distance. For example, if a stock’s 14-day ATR is $1.50 and trades at $50, a 3% trailing stop (~$1.50) aligns with normal daily volatility, reducing premature stop-outs.

One-Cancels-the-Other (OCO) Orders: Managing Multiple Scenarios

OCO orders combine two orders so that when one executes, the other is automatically canceled. This is particularly useful for managing breakout trades or setting simultaneous profit targets and stop losses.

Example: You buy a stock at $30. You want to sell if the price rises to $33 (profit target) or falls to $28 (stop loss). Using an OCO order, you place a limit sell at $33 and a stop sell at $28. If $33 is hit first, the stop at $28 cancels, and vice versa.

How to set an OCO order:

1. Enter your entry order (if not already in position).
2. Place two exit orders: a limit order for your profit target and a stop order for your maximum loss.
3. Link these orders as an OCO pair.
4. Confirm and submit.

Practical tip: OCO orders reduce emotional decision-making by automating exits, which is critical when trading volatile stocks that can quickly reverse.

Bracket Orders: Automating Entry and Exit with Defined Risk/Reward

Bracket orders encapsulate an entry order along with both a take-profit and a stop-loss order. This “brackets” the trade within a predefined risk/reward framework, ensuring disciplined trade management.

Example: You want to buy at $40, set a stop loss at $38 (5% risk), and a profit target at $44 (10% reward). A bracket order allows you to submit all three simultaneously. Once the entry fills, the platform automatically places the stop and limit exit orders.

Advantages:

• Complete automation of trade lifecycle.
• Ensures adherence to risk management parameters.
• Eliminates the need for manual order placement post-entry.

How to use bracket orders effectively:

• Calculate your stop loss based on technical levels or volatility.
• Set profit targets with a minimum 2:1 reward-to-risk ratio.
• Adjust order sizes to reflect risk tolerance (e.g., risking no more than 1–2% of trading capital per trade).

Key Takeaways

• Advanced order types like stop-limit, trailing stops, OCO, and bracket orders are essential tools for managing risk and automating executions in day trading.
• Use stop-market orders for guaranteed fills in liquid markets; stop-limit orders provide price control but risk non-execution.
• Trailing stops can lock in profits while allowing the position to run; setting them based on ATR helps minimize premature exits.
• OCO orders enable managing multiple exit strategies simultaneously, reducing emotional decision-making.
• Bracket orders streamline the trade process by combining entry, stop loss, and take profit orders, enforcing disciplined risk/reward management.

This article is for educational purposes only and does not constitute financial advice. Day trading involves substantial risk of loss.