Trailing If-Touched Orders

Definition

The term Trailing If-Touched refers to instructions sent to a broker to buy or sell securities when the market moves in an unfavorable direction and reaches the limit price.  Trailing If-Touched orders are conditional orders, which can be used to both buy and sell securities.

Explanation

Also referred to as Trailing Market-if-Touched orders, a Trailing If-Touched order is one of several types of contingent orders, which means an event must occur to trigger the order.  This type of order establishes a trigger value that is a specific distance from the market price of the security.  The trigger value then adjusts relative to the market when the price of the security moves in a direction that favors the trader.

Both the buy and sell Trailing If-Touched orders are placed on the same side of the market as limit orders, for example:

  • Buy If-Touched Orders:  with this type of order, the trader would establish a trigger value that is below the current market price of the security.  If the price of the security increases, the trigger value increases by the same amount.  If the price of the security reverses direction and falls enough to reach the trigger value, then a buy market order is executed.
  • Sell If-Touched Orders:  with this type of order, the trader would establish a trigger value that is above the current market price of the security.  If the price of the security falls, the trigger value decreases by the same amount.  If the price of the security reverses direction, and increases enough to reach the trigger value, then a sell market order is executed.

Related Terms

All-or-NoneFill-or-Kill, Good-Til-Canceled, Immediate-or-CancelNational Best Offer, National Best Bid, market order, limit order, day order, One-Triggers-the-Other, One-Cancels-All, Good-Til-Date, At-the-Opening, Market-on Open, Market-on-Close, Time-in-Force, Market-if-Touched