I have a question regarding stop loss orders.
This comes about because I made a mistake when setting one previously.
I'm not sure if the same options are available with other brokers, but with Westpac Broking, I don't have the ability to place a market order triggered by a stop loss, only a limit order...
The mistake I made was to set the trigger price and limited order price to the same value. In practise, what happened was that FMG was trading at around 8.25, my stop loss trigger was set at 8.15 and my limit price was unfortunately also 8.15. For some yet-to-be-explained-to-me reason, it shot down from 8.25 to 7.50 in the space of 5 minutes, completely skipping my stop loss. However, I didn't realise initially that it had been skipped and when I saw it rising back above 7.50 it made a good opportunity to buy back in, but I then found that I didn't have the funds available to do so without the sale. Anyway, as I said, my mistake - albeit a frustrating one!
What I want to do is learn from it... Given that a sell limit order executes at the given price or lower, does it mean that there are no significant downsides (other than potential slippage I suppose) to setting that limit order price significantly below the trigger? That way, as I understand it, it will be guaranteed to be executed? Therefore, is there actually a real-world difference between a limit order, placed significantly below the current price, and a market order? Am I missing something?
And as an aside, does anyone know exactly how long in real terms it takes a stop loss trigger to place a market order? Is it in the region of milliseconds or more like a couple of seconds? I suppose I'm asking in the context of Westpac Broking, as I know it could vary from broker to broker, but what should the expectation be?