Trade parameters 1 - entry and exit limits
Enter the trade when the price reaches a certain value (default = 0 = enter
immediately at market). The value can be positive or negative, and can be either directly
a ask price level, or a distance to the current close price. A positive price
level or positive distance constitutes an entry stop, a negative price level or
negative distance constitutes an entry limit.
An entry limit buys when the price moves against the trade direction and
touches or crosses the limit. It increases the profit
because it buys at a price that went in opposite direction to the trade. An entry stop buys when the price moves in trade direction and reaches or crosses the limit; it reduces the profit, but enters only when the price
is moving in favorable direction, and thus acts as an additional trade filter.
For a long trade, an entry limit should be below and an entry stop should be above the current price. If the entry price is not reached within the allowed time period (set through EntryTime), the trade is cancelled and a "Missed Entry" message is printed to the log file.
Send a limit order at the given limit price, instead of a market order, to the broker at the next enterLong
or enterShort call. This is different to an
Entry limit as it is handled on the broker's side. If not sent in
GTC mode, the order
is cancelled if not filled within the wait time set for the broker API. If the
broker API supports limit orders, this guarantees a fill price at or better than
the limit. In backtests OrderLimit is ignored.
The price limit must be the real limit: an ask price for
enterLong and a bid price (ask minus Spread) for enterShort.
For a combo order it must be the sum of the ask resp.
bid limits of all legs. The script must take care to round the limit to an
integer number of pips if required by the broker API. Unlike
normal orders, not filling a limit order does not produce a "Can't open trade"
error message in the log.
OrderLimit can be combined with GTC orders,
and can be adapted in a tick or
tmf function for filling an order at the best price
within a certain time period when the precise time of entry or exit does not
Stop loss value or stop loss distance in price units (default = 0 = no stop loss). The trade is closed when the price reaches the
given limit or the difference to the fill price reaches the given distance.
When a new trade cannot be entered due to the MaxLong/MaxShort
limit, open trades of the same component are automatically updated to the stop
that the new trade would have. A good value for Stop is derived from the ATR, f.i. 3*ATR(20). Setting a stop loss is recommended for risk control.
Stop loss distance sent to the broker to act as a 'safety net' in case of a computer crash,
in units of the real stop loss distance. At the default value 1.5 the stop sent to the broker is 50% more distant, thus preventing 'stop hunting' or similar broker practices. At 0 the stop is only controlled by software; at 1
it is only controlled by the broker.
If StopFactor is set to a negative value or if a BrokerStop function is not available in the broker plugin, the broker stop is only placed at opening the trade, but not updated afterwards. StopFactor has no effect on pool trades in Virtual Hedging Mode.
Stop orders on NFA compliant accounts must be
explicitely enabled with the SET_ORDERTYPE
Broker stop loss distance for pool trades in Virtual Hedging Mode. At the default value
0.25 any pool trade sends a stop to the broker at 25% distance from the
initial price (non-NFA mode only). When set to
0, pool trades have no stop loss.
Profit target value or profit target distance in price units (default = 0 = no profit target). The trade is closed when the trade profit has reached this amount.
When a new trade cannot be entered due to the MaxLong/MaxShort
limit, open trades of the same component are automatically updated to the profit
target that the new trade would have.A profit target takes profits early, which increases the number of winning trades, but normally reduces the overall profit of a strategy. It is preferable to use TrailLock instead of setting a profit target.
Raise the stop loss value as soon as the price reaches the given value, or goes in favorable direction by the given distance in price units (default = 0 = no trailing). Has only an effect when a Stop is set. The stop loss is increased in a long position, and decreased in a short position so that it normally follows the price at the distance given by the sum of the Stop and Trail distance.
For instance, Stop = 10*PIP and Trail = 5*PIP
lets the stop follow the price at 15 pips distance. A slower or faster 'movement speed' of the stop loss can be set through TrailSlope.
Trailing 'speed' in percent of the asset price change (default = 100%); has only an effect when Stop and Trail are set and the profit is above the trail distance. Example: The asset price of a long position
was above the Trail limit and goes up by more 10 pips. TrailSlope = 50 would then raise the stop loss by 5 pips. TrailSlope = 200 would raise the stop loss by 20 pips.
'Locks' a percentage of the profit (default = 0 = no profit locking); has only an effect when Stop and Trail are set and the price has exceeded the trail distance. A stop loss is then automatically placed at the given percentage of the current price excursion. Example: A long position is currently in profit by 20 pips above the entry price. TrailLock = 80 would then place the stop loss at 16 pips above entry, thus locking 80% of the profit (without trading costs). TrailLock = 1 (or any small number) would set the stop loss at the entry price when the current price reaches the Trail value. Using TrailLock is in most cases preferable to setting a profit target.
Automatically raise the stop loss every bar by a percentage of the difference between current asset price and current stop loss (default = 0 = no automatic trailing); has only an effect when Stop and Trail are set and the profit is above the trail distance. Example: A long position has a stop at USD 0.98 and the price is currently at USD 1.01. TrailStep = 10 will increase the stop loss by 0.003 (30 pips) at the next bar. TrailStep reduces the trade time dependent on the profit situation, and is often preferable to a fixed exit time with ExitTime.
Stopping and restarting a strategy counts as a step and will raise the stop loss
as if a bar had passed.
Speed factor for faster raising the stop loss before break even, in percent (default = 100%). Has only an effect when Stop and Trail are set and the profit is above the trail distance. Example: TrailSpeed = 300 will trail the stop loss with triple speed until the entry price plus spread is reached, then continue trailing with normal speed given by TrailSlope and TrailStep. Has no effect on TrailLock. This parameter can prevent that a winning trade with a slow rising stop turns into a loser.
- All parameters above are asset specific. They must be set after selecting the asset and before
entering a trade with enterLong / enterShort. They have no effect on different assets or on already entered trades, except when an enter call
updated open trades due to a MaxLong/Short limit. For changing a stop or profit target of a trade
that was already entered, use either a TMF, or call exitTrade with the new price limit (see example).
- Either an (absolute) price level, or a (relative)
distance to the trade opening price (TradePriceOpen) can be used for
Stop, TakeProfit, Trail, and
Entry. If the value is less than half the asset price, Zorro assumes that it's a distance, otherwise it's a price
For options the prices are always distances, f.i.
Stop = 0.7 * contractPrice(ThisContract) sets a stop limit at
70% loss. For an entry limit the given price must be negative; "buy at 10 pips below the current Low" is in code:
Entry = -(priceLow()-10*PIP);. If Stop or
TakeProfit are on the wrong side of the price, no trade is entered, but a "Skipped" message is printed in the log file.
- Entry and OrderLimit are
equivalent. Entry generates a
pending trade that is either filled at market when the price touches
the limit, or cancelled after EntryTime.
OrderLimit generates no pending trade, but places a limit order at
the exchange that is either filled at the given limit, or cancelled after a
time determined by SET_WAIT. A pending trade can be filled at a worse price than the limit;
a limit order cannot. A pending trade won't require margin and commission, a
limit order might, depending on broker and market. Entry limits are used to
enter a position when the price drops by a certain amount or reaches a certain
limit. Order limits are normally used to ensure entry at the current price,
or at a slightly better price such as the center of ask and bid.
Entry and OrderLimit can be combined for ensuring
a fill at the limit price. Some brokers might reject limit orders when OrderLimit is too
close to the current price, or when it is not rounded to a multiple of a PIP.
Forex/CFD brokers normally don't support limit orders, but convert them
internally to pending trades. It is not recommended to use OrderLimit
when limit orders are not properly supported by the broker.
- Since order limits are handled on the exchange, they have
no effect in a backtest. For a rough order
limit simulation by script, use Entry as a proxy. Run the test in TICKS
mode with BBO tick data in .t1 format, convert the limit to
an entry ask price, deduct the margin, and set
EntryTime to the same time as the
broker API wait time (60 seconds by default). Even then, entry limits are no accurate
simulation of order limits because they ignore effects by the API order chain, the execution
and the connection speed. For a precise simulation, let your script use order book data
in .t2 format and fill the trade at the matching quote by
orderUpdate under consideration of the latency to the exchange.
- Except for OrderLimit, all prices are given as
ask prices, regardless of whether they are intended for entry or exit, or for a long or a short trade. A trade is opened or closed
at market when the
ask price reaches the given entry or exit limit. Zorro automatically handles the conversion from
ask to bid: long trades are filled at the ask price and closed at the bid price, short trades are filled at the
bid price and closed at the ask price. The bid price is the ask price minus
Spread. For setting prices or distances in
pip units, multiply the pip amount with the
PIP variable (f.i. Stop = 5*PIP;). For adapting distances to the price volatility, set them not to fixed pip values, but use a multiple of
ATR(..) - this often improves the performance.
- Price distances and limits need normally not be rounded, unless they are
directly sent to the broker, such as OrderLimit. Directly
sent prices are
automatically rounded to the next 1/10 pip for currencies, and to the next
pip for all other assets. If a different rounding step is needed, use the
- In bar-based backtests, intrabar entries and exits are based
on a simulated price curve inside the bar. If a limit is hit,
trades are filled at the most recent price, which is normally
different to the entry, stop,
or profit limit. If desired, 'naive' filling at the limit can be
enforced with the Fill variable. Stop is always triggered earlier inside the bar than
TakeProfit, causing a slightly pessimistic test result when
multiple limits are triggered
within the same bar. Entry and exit limits will not be triggered at the same
at the same time. Use TICKS mode when intrabar
precision is required,
especially when the trade profit depends on intrabar entry and exit limits.
- When absolute price limits are given for Trail, TakeProfit,
Entry, or Stop, they should be at the correct side of the current market price with sufficient distance. Limits at the wrong side of the price
cause error messages or unfavorable trades. When the
Entry condition is already met at entering (f.i. a long trade is entered with the market price already below the entry limit), the trade will be opened immediately at either the market price or the entry price, whatever is worse. When the
Stop limit is already met at entering, the trade will be
opened and immediately closed, losing slippage and spread. If a trade lasts only one or a few
ticks, the result by stop or trailing can become inaccurate by a large factor due to the limited resolution of the price history.
- TrailSlope, TrailStep, and TrailLock
can be set simultaneously. The stop loss limit is then trailed by their
largest movement inside a tick or bar. On a long
trade, the stop limit is trailed by the High and limited by the Low; on a
short trade it's the other way around. When the
Stop is moved inside the price range of the current bar or
tick, the trade will be immediately closed. If a more complex stop loss / take profit
/ trailing behavior is required, use a TMF. The TMF runs at every price quote - or every
tick - and can trail and check stop and profit limits.
- All stop, profit, trail, or entry limits are normally handled by software and controlled at each
tick. They are not sent to the broker's server (except for
OrderLimit and the 'safety net' stop given by StopFactor) and thus not visible to the broker, this way preventing
'stop hunting' or similar practices. This also steps around
NFA Compliance Rule 2-43(b) that does not allow US citizens to
directly place stop or profit targets, and requires to emulate exit limits
with different orders.
- A stop loss - regardless if handled by software or sent to the broker - is
no guarantee to limit losses. In case of low
market liquidity or price shocks (such as the EUR/CHF price cap removal in January 2015)
brokers can often not close trades at the stop loss level, and close them at
the next opportunity instead. The real loss of the trade will then be remarkably higher.
- Stop limits updated to the broker can appear to temporarily move in 'wrong' direction by a small distance. This can happen when the spread changes at the same time, but in opposite direction as the price.
- When Zorro runs unobserved, placing stop loss limits is recommended, even when they appear to reduce the strategy performance. They protect against price shocks. The trade engine also uses them for calculating the risk per trade; without a stop, the capital exposure is not available and the performance statistics are less precise.
- The win rate ('accuracy') of a system mostly depends on the
Stop/Takeprofit ratio, also called
This way you can set up any win rate for your system up to almost 100%.
Chapter 9 of the Black Book deals with the
consequences of setting extreme win rates.
Stop = 0.01*priceClose(); // set stop at 1% distance
bar, enterLong/Short, exitLong/Short, EntryTime, ExitTime, Lots, TMF
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