How to Create Stop Orders on thinkorswim® Desktop

Upbeat music plays throughout.

Narrator: Hey, traders. My name is Joe Mazzola and in this video, I'm going to show you how to place sell stop orders on the thinkorswim^® platform.

Now specifically we're going to look at three examples. How to open a position and attach a sell stop order, how to attach a sell stop order to an existing position, and, finally, how to adjust your price once you have a sell stop order in place. Let's jump in and take a look.

On-screen animation: The thinkorswim^® platform appears on screen.

Narrator: For our first example, I'm going to show you how to buy 100 shares of stock while simultaneously attaching a sell stop order. To do this, navigate to the Trade tab and type in a symbol. For this example, let's use Apple (AAPL).

Next, right click your mouse on the Ask price, hover over Buy Custom, and select with STOP. You'll see that two orders have now appeared at the bottom of our screen, both a buy and a sell order, and the advance order type has automatically been set to first triggers all.

What this means is because this is a sequence of orders, the first order must fill for the second order to begin working. You can see we have an order to buy 100 shares of Apple stock at a floating limit price good for the day.

Floating means the padlock is open so that the price in the box is floating with the current market on the ask price, and the second order is a sell order to sell 100 shares of stock on a standard stop market order.

Now, let's break this down. A stop market order is an order that triggers off a price and then sends a market order to sell shares of stock at the best available price at that moment. The standard means that the trigger price will trigger based off of the bid price.

If this was a buy order, the standard stop order would trigger off the ask price. You can change this by clicking the dropdown here.

Animation: Arrow pointing at Order box for the stop order.

Narrator: If you want your sell stop order to trigger off the ask price, you can select that here. The mark price triggers halfway between the bid and the ask price, so you have some choices about how you want your stop order to be triggered.

So if you wanted to buy Apple shares, for example, $134, you could type that in and hit enter. You'll notice that the padlock is now locked and we are no longer floating with the current market. So in order for us to get a fill on these shares, Apple stock would need to go down to $134. You can see our stop trigger price is, by default, set to a $1 offset.

The other thing to notice is this little link button. Currently these orders are linked together. And what I mean by that is if I change the price in the upper buy order, you'll notice that the sell stop trigger price keeps that $1 offset connected.

Now, if we go back to $134, you'll see that the stop orders are at $133. If you simply just want to do this off price and you're happy with the order as is here, you could hit Confirm and Send. And review the order.

Animation: An arrow points at #1 and #2 Order Descriptions.

Narrator: You can see your buying 100 shares of Apple limit to open, and then the sell stop would be triggered by the fill of order number one, which you can see here in the order confirmation ticket.

What if we want to get a fill on that buy order right now? Well, we can change this to a market order, and you'll notice that this link is now gone. And we simply have our price field for the stop trigger, and we can change that back to a value offset, to a step offset, or simply a dollar offset.

Animation: Arrow selects the "TIF", or Time in Force box for the stop order, and "GTC" is selected.

Narrator: Let's do this as a minus $2 offset. So what will happen in this order is we will buy 100 shares of Apple at the current price whenever we send this order. Once we get a fill on that, a sell stop order will be working at a $2 offset, and we can change that to a good till cancel order so we know that the order is working.

Animation: Order confirmation ticket appears on the screen.

Narrator: Let's take a look at what this looks like. We have buy 100 shares of Apple on a market order to open, and then sell 100 shares of Apple on a stop triggered off of a $2 offset based on our fill price, good till cancel, triggered by number one, and we're doing this in our demonstration account. I'm going to hit Send, and then we've got our fill on our Apple shares.

Now, let's go to the Monitor tab and look under today's trade activity under the Activity and Positions page. You'll see that we have a fill on our Apple shares, but you'll also see that we're working in order to sell 100 shares of Apple based off of our stop price. Now, there's that $2 offset. We got filled at $134.36 and because we put a $2 offset, we have a $132.36 stop price.

So when the bid price on Apple reaches $132.36, a market order will be sent to sell these shares and we will get a fill based on the best available price at that time once this price is triggered.

Now remember, with a sell stop market order, you're never guaranteed a fill price. You're only guaranteed that your shares will fill at the next available price at that moment. So this means in fast markets or illiquid markets, there's the potential that once that stop price is triggered, your fill price could be substantially lower than what your stop price was set at.

OK, for our second example, I'm going to show you how to attach a sell stop order to existing shares of stock in an account. For this example, we're going to use this Microsoft position we have in our demo account, and you can see we're long 100 shares, which we bought around $150. Currently that stock's trading around $237, so we have some unrealized profit on this position.

Well maybe the trader wants to put a stop order in to potentially sell these shares of stock if we get a sell off from the current price.

Let's imagine we wanted to put that stop order right at $230. To do that, we're going to open our position, right click on the position, hover over Create closing order, and select with STOP. You'll see a sell order has queued up at the bottom of our screen to sell 100 shares of Microsoft (MSFT) stock on a standard stop market order, just as we did in the previous example.

The only difference is you can see the order type is a single order. We're not doing this as first triggers or contingent order. There's no buy order in front of it. We're simply going to put a sell stop order on our existing shares that we have in the account. First thing we're going to do is select our price. We said we're going to put that stop at $230, and let's change that time in force to good till cancel. And once again, when the bid price on Microsoft hits $230, a market order will be sent to sell these shares at the best available bid price. A stop order does not mean we'll get a fill at $230, it just means that our shares will be triggered to sell once that bid price hits $230.

Animation: Order confirmation ticket appears on the screen.

Narrator: We're going to hit Confirm and Send and review this order one last time. Make sure we're selling 100 shares of Microsoft on a stop order at $230 trigger, the order is good till cancelled, and this is to close our position.

Animation: The "Working Orders" section is selected.

Narrator: Hit Send, and we'll go to our monitor tab, and you'll now see in our Working Orders we have two working orders. Our Microsoft order that we just put in to sell our existing shares, and then you'll also notice our previous example, which is to sell our Apple shares that we just purchased.

For our last example, I'm going to show you how to cancel and replace an existing stop order. Now, let's use this example we did with Microsoft. We'll go to our Monitor page, Activity and Positions, and open the Working Order section.

You can see both of our stop orders that we've placed in this video are still working. We're going to right click on this order and hit Cancel/replace order.

This is the same order we cued up a few seconds ago for $230. Now, let's imagine we wanted to change the price on this and put it down to $225, keep it as a good till cancelled order, and then hit confirm and send.

Go to our monitor tab, and you'll notice we got our message that the order has been canceled, and there's our cancel of the Microsoft sell stop we just put in. And you'll see that the new stop order has been placed at a new price of $225 still good till canceled.

Now, what if you just wanted to cancel one of these outright? Very simple. Let's just use Apple from earlier in the video; right click on that, and hit Cancel order. You'll see that we've got a message that the stop order is canceled, that sell badge is now gone from our position, and the only remaining stop order in our account is the Microsoft order that we just canceled and replaced.

And that's a quick look at how to place sell stop orders on the thinkorswim platform. For more investor education and tutorials head over to schwab.com, and don't forget to check out all the great content on our YouTube channel.

On-screen text: [Schwab logo] Own your tomorrow^®