What is a REL Order?

A REL Order (Relative Order) is a special order type used particularly with Interactive Brokers (IBKR). It allows traders to automatically adjust buy or sell orders to the current market price by setting a fixed price distance (offset) to the best available bid or ask.

How It Works

A REL Order is a dynamic limit order that continuously adjusts to the market price:

• Buy Order: The limit price is set to the current best bid plus the defined offset.
• Sell Order: The limit price is set to the current best ask minus the defined offset.

Example: If the best bid price is $100 and an offset of $0.05 is set, the REL buy order is placed at $100.05. If the best bid price changes, the REL order adjusts accordingly.

Advantages

• Automatic Price Updates: The order always stays close to the current market price without requiring manual adjustments.
• Better Execution Chances: Because the REL Order orients itself at the "better end," better executions can be achieved even with large spreads.
• Flexibility: Particularly useful in volatile markets, as the order automatically adapts to price changes.

Things to Consider

• Market Conditions: In markets with low liquidity or wide spreads, a REL order may not be executed.
• Wrong Offset: If the offset is set too low, execution may happen very late or not at all.
• Wrong Limit: With a REL Order, in addition to the offset, a limit is also required. If this is set too low and the price exceeds the limit, the order will not be executed.

REL Stop Order vs. Conventional Stop

A REL Stop Order (Relative Stop Order) is a limit order that adjusts dynamically. In contrast, the classic Market Stop Order is executed immediately as a market order when the stop price is reached. Both order types have advantages and disadvantages.

Conclusion

The choice between a REL Stop Order and a Market Stop Order depends on individual trading strategies and risk preferences. While the REL Stop Order offers more control over the execution price but carries the risk of not being executed, the Market Stop Order guarantees execution, but possibly at a less favorable price.

For more information on order types and their application, we recommend visiting the official Interactive Brokers website.