This article explains why an order can be rejected with an invalid price message, and how to place your stop orders so the rejection does not happen again.
Symptom
- An order is rejected as soon as it is submitted.
- The rejection message reports an invalid price.
- The order is a stop order and its stop price is ahead of the market.
Cause
This error may appear when submitting a stop order if the stop price is ahead of the market. A stop price is only valid when it sits on the correct side of the current market price for the order action.
Where the stop price must sit
Buy stop order
For a buy stop order, such as when exiting a short position or entering a long position, the stop price must be above the current ask price.
Short 1 ES 12-26, bid 6512.00 / ask 6512.25. 1 = the current ask (6512.25, the last trade); 2 = the buy stop that protects the short at 6514.25, above the ask: accepted; 3 = 6511.25, below the ask: a buy stop sent at this price is rejected with the invalid price message. A sell stop is the mirror image: it goes below the bid (6512.00).
Sell stop order
For a sell stop order, such as when exiting a long position or entering a short position, the stop price must be below the current bid price.
How to avoid the rejection
- Check the current bid and ask before you submit the order.
- For a buy stop, adjust the stop price to be greater than the ask.
- For a sell stop, adjust the stop price to be less than the bid.
- Submit the order again with the corrected stop price.
Fast-moving markets
In a fast-moving market, it is advised to place stop orders far enough behind the market price, on the proper side of the market for the corresponding order action, so the order stop price is not ahead of the market when the order is received by the brokerage.
Adding a few ticks of distance from the stop price to the current bid for sell orders, or from the current ask on buy orders, on the proper side of the market, can alleviate frequent order rejections.
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