DislikedIt is my understanding too that stop orders are held only on the books of the broker/market maker and are not visible on any external order book. When triggered they execute as market orders (which consume liquidity compared to limit orders which provide liquidity). This explains how triggered stops can cascade into larger moves - large market order volume eating up liquidity at each price level forcing price to move up (or down) the price ladder until all orders have been filled.
An order is an order. [b][i]Stop orders and Limit orders both provide...Ignored
so what eventtrading is saying ..correct me if im wrong event is that limit orders including all the different types.. supply liquidity to the market.. liquidity is simply the ability of price to transact vrs the price impact of transaction... the reason why limit orders are liquidity providers is because they are not an immediate transaction and are pending to fill orders but dont need to be triggered so they apply liquidity to the market or ease of finding a fill order.. Market orders will seek to eat liquidity by seeking out higher areas of larger quantity orders and must be transacted on a now time basis.. market orders will eat liquidity running the market while widening the spread and limit orders tightening the spread. The moment the stop orders are triggered they are changed and processed as market order at limit price this inter eats liquidity and causes more drastic price impact in relation to the depth of the market.. for example if price moves and triggers a limit order and it then at that price is sent to the market as a market order at limit price it will swallow the liquidity in the market and varying on depth may not move price if the market depth is deep or may more significantly move price if market depth is shallow..? am I understanding you event? Market depth sometimes also refered to as liquidity or the ease of finding a fill vrs price impact so if using a real example traders are looking to buy and price breaks out long and there are many sellers in the market the market depth will be deep for the orders triggering long market or limit and the breakout.. thus stunting price movement and swallowing the move.. but as the sellers build into the market and soak up the liquidity or market depth and drive down price they reduce the liquidity and the stops or any other orders pending at the lows will be sell orders.. with market depth eaten by the sellside orderflow trigger of agressive sellside limit and market orders at failure or breakout will result in widening spreads reduced market depth and larger sellside price impact..
this is of course without discussing the effect of hidden liquidity