Article

# Trigger Order: A Guide to Algorithm Trading Strategy

Trigger orders are a type of algorithmic trading strategy that allows traders to pre-define a trigger price and an order price. When the market price reaches the trigger price, the order is automatically placed at the preset order price. This strategy is commonly used for momentum trading, exit trades, and for setting stop-loss or taking profit orders. Unlike stop orders, trigger orders do not freeze margins or positions.

In this article, we will dive into the basics of trigger orders, including a definition of the key terms, and how to use this strategy effectively in your trading.

## What is a Trigger Order?

A trigger order is a type of algorithmic trading strategy that allows traders to pre-define a trigger price and an order price. The order will be placed automatically at the preset order price once the market price reaches the predefined trigger price. This strategy is commonly used for momentum trading, exit trades, and for setting stop-loss or taking profit orders.

## Key Terms in Trigger Orders

1. Trigger Price: The predefined condition that will trigger the order. The trigger price is the market price that, once reached, will activate the trigger order.
2. Order Price: The price at which the order will be placed once it is triggered. Traders can choose to place the order at market price, which will fill the order at the best available price, or they can enter a specific price.

## How to Use a Trigger Order

Now that we have defined the key terms, let's take a look at how to use trigger orders effectively. Below are four common use cases:

### Closing a Long Position for Stop-Loss

Suppose a trader holds a long Bitcoin (BTC) contract with an average open price of \$9,000 and wants to close the position if the market price drops to \$8,000. The trader can place a trigger order with the following parameters:

Trigger Price: \$8,000 Order Price: \$7,950 (it is recommended to set the order price lower than the trigger price to ensure that the order is filled immediately, although market price is also a good choice)

If the price falls to \$8,000, the trigger order will be activated, and the long position will be closed at \$7,950.

### Closing a Short Position for Stop-Loss

Suppose a trader holds a short BTC contract with an average open price of \$9,000 and wants to close the position if the market price rises to \$10,000. The trader can place a trigger order with the following parameters:

Trigger Price: \$10,000 Order Price: \$10,050 (it is recommended to set the order price higher than the trigger price to ensure that the order is filled immediately, although market price is also a good choice)

If the price rises to \$10,000, the trigger order will be activated, and the short position will be closed at \$10,050 (or at the market price if the order price is set to market price).

### Opening a Long Position

Suppose the current market price of the BTC contract is \$11,500, and a trader believes that the market will turn bullish if the price breaks through the \$12,000 level. The trader can place a trigger order with the following parameters:

Trigger Price: \$12,000 Order Price: Market price (or \$12,050)

If the price rallies to \$12,000, the trigger order will be activated, and a long position will be opened at the market