Take Profit and Stop Loss Orders (TP/SL)

TP/SL orders are fundamental risk management tools for the automated closing of a position. A Take Profit (TP) order locks in gains, while a Stop Loss (SL) order is designed to minimize potential losses.

Trigger Mechanism

All TP/SL orders on SoDEX are triggered by the Mark Price. This ensures execution is based on a stable, manipulation-resistant price index, mitigating risks associated with volatile last-traded prices. TP/SL orders will be executed as Market Orders in SoDEX.

As a concrete example, an SL order to close a long with trigger price $10 and limit price $10 will hit the book when the mark price drops below $10. If the price drops from $11 to $9 instantly it is quite likely this SL order would rest at $10 instead of filling. However, if the limit price were $8 instead of $10, it's likely to fill at some price between $9 and $8.

TP/SL associated with a position

When a TP/SL order is created from an existing position, it defaults to the full size of that position. This is designed to ensure that the entire position is closed when the specified profit or loss level is reached, providing a straightforward way to manage your exit strategy exits.

TP/SL as OCO Orders (One-Cancels-the-Other)

When Take Profit and Stop Loss orders are attached to a new, unexecuted parent order, they form an OCO relationship. The behavior of these child orders depends on the fill state of the parent order.

• Immediate Activation: If the parent order is fully filled upon placement, the associated TP and SL orders are immediately activated and placed on the order book.

• Untriggered State: If the parent order is not fully filled, the child TP/SL orders enter an untriggered state. They are not yet active. If the trader manually cancels the partially filled parent order, the child TP/SL orders are also canceled.

• Manual Management Required: Following the cancellation of a partially filled parent order, any TP/SL for the resulting partial position must be created manually by the trader.

• Insufficient Margin Exception: A key exception occurs if a partially filled parent order is canceled by the system due to insufficient margin. In this specific case, the child TP/SL orders will be activated for the filled portion as if the order had been fully filled.

In summary, child TP/SL orders from a parent OCO will only be placed and activated if the parent order is fully filled, or if it is partially filled and then canceled due to an insufficient margin error.