Do you use some feature in your trading platform that seems so intuitively and obviously useful to you but hardly anyone knows it exists? I feel this way about what I refer to as “time stops” (a.k.a. Good After Time orders) in Interactive Brokers’ trading platform called TWS.
It’s a very simple property called the Good After Time or Start Time that you can set on any order. When set, the order is held and not activated until the current time is past the Start Time.
Why is this Useful?
Any trade you make should have a “lifetime.” That is, what is the plan if you enter a trade and your stop price and your target price (if you have one) don’t get reached? Do you leave the position open forever? No — at some point another profitable opportunity will come along that you’ll need capital to take. This part of the trading plan is important and often overlooked. If you don’t have a predetermined plan for this trade lifetime then you’re in danger of turning “trades” into “investments” and falling victim to the endowment effect — the psychological fallacy common to all humans but especially traders where you value something more than you should simply because you own it.
By placing a Start Time on a market order to exit your existing position you do two things:
- Fully execute your trading plan by committing to a timed exit.
- Automate your trading plan knowing you don’t have to remember to exit at a certain point in time.
Be Prepared for the Rare but Potentially Expensive Scenario
Number two is important — have you ever had a power outage or network outage (or computer glitch) at the exact moment when you’ve needed to place a trade? If you haven’t yet it’s just a matter of time before you do. This order allows you to rest easy knowing that your order will go live according to your plan whether you happen to be online or not.
This is in fact the best part about this order type. If you manually exit your trades at the end of the day, some part of your brain is wasting energy remembering to take this rote action. A time stop frees up that mental energy to do something else.
I’m always surprised how few traders know about and use this order type when it has become such an important part of my routine for almost a decade. I could not trade without it.