Minimum Limit/Stop Distance Explained

Minimum limit/stop distance refers to the minimum price movement required for placing a limit or stop order on a financial instrument. This distance is crucial as it helps in setting precise orders and avoiding unintended trades due to minor price fluctuations. The requirements vary based on the asset class.

Forex

• Minimum Limit/Stop Distance: 1 pip or 10 points

• Example: For the GBP/USD currency pair with a current market price of 1.30000:

  • Buy Limit Order: The entry price must be set at least 1 pip below the current price, i.e., 1.29900 or lower.
  • Sell Limit Order: The entry price must be set at least 1 pip above the current price, i.e., 1.30100 or higher.
  • Buy Stop Order: To buy above the current price, set the entry price at 1.30100 or higher.
  • Sell Stop Order: To sell below the current price, set the entry price at 1.29900 or lower.

  Note: For EUR/USD with a bid price of 1.20000 and an ask price of 1.20100, if setting a stop/limit distance of 10 points (1 pip), it would be applied from the bid price downwards (1.19900) or from the ask price upwards (1.20200), depending on the position.

Indices

• Minimum Limit/Stop Distance: 1.50 USD

• Example: For NASDAQ 100 with a current market price of 13,500 USD:

  • Buy Limit Order: Set the entry price at 13,498.50 USD or lower.
  • Sell Limit Order: Set the entry price at 13,501.50 USD or higher.
  • Buy Stop Order: Set the entry price at 13,501.50 USD or higher.
  • Sell Stop Order: Set the entry price at 13,498.50 USD or lower.

  Note: For the DAX (quoted in Euros) with a current price of €14,000, convert $1.50 to Euros using the exchange rate (e.g., €1.36 if the rate is 1 Euro = $1.10). Similarly, for Japan 225 (Nikkei 225) with a price of 30,000 JPY, convert $1.50 to Yen (e.g., 165 JPY if the rate is 110 JPY = $1).

Gold/Commodities

• Minimum Limit/Stop Distance: 0.20 USD
• Example: For Gold with a current market price of 1,800 USD per ounce:
  • Buy Limit Order: Set the entry price at 1,799.80 USD or lower.
  • Sell Limit Order: Set the entry price at 1,800.20 USD or higher.
  • Buy Stop Order: Set the entry price at 1,800.20 USD or higher.
  • Sell Stop Order: Set the entry price at 1,799.80 USD or lower.

These minimum distance requirements help in managing trades effectively by ensuring orders are placed at significant price levels rather than being triggered by small, insignificant price movements.