Adaptive Stop Limit

Study Notes:

The Interactive Brokers Adaptive Stop Limit Algo order type combines IBKR’s Smart routing capabilities with user defined priority settings in an effort to achieve a better than average cost efficiency over a limit order once it has been triggered by the Stop price. The Adaptive Stop Limit algorithm achieves this by attempting to trade between the spread.

The Adaptive Stop algorithm is accessible in Classic TWS and Mosaic. In Mosaic the investor can enter a symbol into the order entry panel, for example IBKR, choose buy or sell in the lower left-hand corner, and enter the quantity desired, in this case one thousand shares. Now click on the order type and scroll to IBALGO and select Adaptive STP in the sidecar window. Select the limit price and set the stop price and click on the Advanced button. In the Algo parameters area “Adaptive” will populate the first drop-down box.

Directly underneath is the Adaptive order priority/urgency selection box. The investor can choose Urgent, Normal, or Patient.

• The Urgent setting scans available prices most quickly to fill. This will provide the lowest chance of price improvement and price variance.
• Normal, which is the default setting, scans available price less quickly than “Urgent” and provides a good chance of price improvement and average chance of price variance.
• Patient provides the highest chance of price improvement and price variance by scanning prices slower than Normal.

Once the investor chooses the priority and closes the Advanced window, they may click submit and an order confirmation window will appear showing that the order type is Adaptive Stop Limit, Time in Force is Day, since GTC orders are not allowed for Adaptive IB algorithmic orders, Strategy is Adaptive, and the priority urgency will state the investor’s choice. When satisfied that the information is correct click transmit and the order will be submitted.

Once submitted the order will be shown with Adaptive Stop Limit in the Order Type column.

The Adaptive Stop Limit Algo order type is designed to ensure that aggressive limit orders trade between the bid and ask prices once they have been triggered by the stop price. On average it should lead to better fills.