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Next: where a stop should live
Stop loss orders and what happens when the bot is down.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- Interactive Brokers API is a broker connection you reach from your own code. This page explains the general method, not the product's current features.
- A bot is only as trustworthy as its test. Before relying on any result here, check costs, fills, data and timing, and keep a stretch of data the rule never saw.
- The worked example on this page uses made-up numbers, checked in node on 31 Oct 2026. It shows the arithmetic, not how any product performs.
- Prices, fees, markets, versions, limits and supported languages change and belong to the vendor. We state none of them. Check the vendor's current pages.
- Start on a simulated account, keep stops where they still work if the bot stops, and move to real money only in very small steps, if at all.
What it is
Interactive Brokers is a large brokerage that offers a programming interface to its accounts. The general design is worth understanding because several brokers use it: a program supplied by the broker runs on your computer, you log into it, and your own bot connects to that program over a local network socket instead of connecting to the broker's servers directly. The bot sends requests to the local program, which relays them, and the program passes back prices, order updates and account data.
Client libraries exist for several languages, but which and how maintained is for the vendor to say, and there are also community libraries that wrap them. Markets, account types, fees and data subscriptions are the vendor's to state and change, so check its current pages. This page explains how it works in general terms. We have not tested it for this page. Check the vendor's current terms.
How a bot connects here
The connection style is a broker API through a local gateway.
- A program must be running and logged in. Without it the bot has nothing to talk to. Programs of this kind often need re-login on a schedule, so ask the vendor how current versions handle it.
- Asynchronous messages. Replies arrive as callbacks, not as return values. Match them to requests by id.
- Order ids. Each order carries an id the bot must manage. Reusing or losing ids causes confusion.
- Paper account. A simulated account is normally available, with its own login and its own connection settings. Confirm the current arrangement with the vendor.
- Market data is separate. Data subscriptions and delays are their own topic. A bot given delayed data trades on the past.
Worked example: a position with no working stop
Suppose a bot holds 200 shares at a made-up $80, and its protective stop lives only inside the bot. The gateway restarts and the bot is disconnected for 10 minutes. During that time nothing watches the position. To size the exposure, assume a made-up volatility of 0.05% per minute. Over 10 minutes the typical move grows with the square root of time: 0.05% x sqrt(10) = 0.158%. Numbers are made up and checked in node.
| Item | Value |
|---|---|
| Position value | $16,000 |
| Assumed price move per minute (one standard deviation) | 0.05% |
| Minutes without a working stop | 10 |
| One standard move over that time | 0.158% |
| In money on 200 shares | $25.30 |
| A move three times as large | $75.89 |
A typical move over 10 minutes is 0.16%, about $25.30 on this position, and a fast move three times as large is about $75.89. These are small beside the position, and that is not the point: the loss in this window is not limited by the rule you wrote, and a gap can be larger than any assumed volatility. The usual answer is to place the protective stop at the broker, where it works even if the bot and the gateway are both down, and to have the bot read current orders and positions the moment it reconnects. See stop loss orders and trailing stops.
What to verify before trusting a backtest here
These checks apply to any platform of this kind. The answers come from the vendor's current documentation and from your own tests, not from this page.
| Check | Why it matters |
|---|---|
| Reconnect behaviour | On reconnect, read open orders and positions before sending anything. |
| Where protective stops live | At the broker is safer than only in the bot. |
| Order id handling | Never reuse an id. Persist the next id. |
| Paper versus live settings | Different login and connection details. Make the choice explicit. |
| Data delay and subscriptions | Know whether your prices are live or delayed. |
| Costs in the backtest | The API gives no backtester. Use honest costs. See slippage. |
How bots break on this kind of platform
- Gateway restarts. The bot disconnects with a position open.
- Lost message. A fill is missed and the bot's record is wrong.
- Duplicate or reused order ids. Orders rejected or mixed up.
- Delayed data. The signal fires on old prices.
- Bot and gateway versions drift. An update changes behaviour. See slippage for what a fill can cost.
A safe order of work
Backtest with honest costs, forward test on new data, run on a simulated account for weeks, then trade a very small size and compare each step with the one before. See forward testing and paper trading.
What this page does not tell you
It does not tell you whether the product is suitable, what it costs, or how it behaves today. Those change and belong to the vendor. It does not give a strategy to trade. This page explains how it works in general terms. We have not tested it for this page. Check the vendor's current terms.
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FAQ
Frequently Asked Questions
Do I need to keep a program running to use this kind of API?
With gateway-style APIs, yes: a program supplied by the broker runs on your computer and your bot connects to it. Check the vendor's current set up.
Can I test a bot on a simulated account first?
Brokers of this type normally offer one. Check the current arrangement and remember simulated fills are usually kinder than live ones.
Does a good Interactive Brokers API backtest mean a bot will make money?
No. A backtest shows how a rule behaved on past data under its assumptions. Costs, fills, data and luck can all make live results different.
Should I test on a simulated account before real money?
Yes, as a general practice. A simulated account tests your code and your plumbing. Its fills are usually kinder than real ones, so it does not prove a rule works.
Have you tested Interactive Brokers API?
No. This page explains how it works in general terms and we have not tested it for this page. Check the vendor's current terms.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is general education. The numbers are made up and it does not consider your situation.
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