ES Wednesday 10-26-16 : Hot Topic

Simulated Stop

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Definition of 'Simulated Stop'

A Simulated Stop is a Stop which is only executed when the number of contracts bid or offered at the stop price drops below a certain level.

If, for example, you are Long the E-mini S&P500 and your Simulated stop is at the 1234.50 price with a contract level of 400. The market trades down to 1234.50 but there are 3,000 contracts Bid at this price. While you are watching only 1,000 contracts trade on the Bid before the market moves back up again. By using a Simulated Stop your Stop order was never executed because the number of contracts Bid at your stop price never dropped below the level that you specified.

Traders use this type of Stop to "hang in" the market for longer to try and save their trades. It can be an effective method if the price is a particularly strong Support or Resistance level. But the trader will typically suffer more Slippage using a Simulate Stop than a normal Stop.

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