The DANGER of market orders

[TWI]

Had a stop go in BPH05 this morning at 1.9235. this was at 11:56hrs
I started using automated trading on TS8 last week so have been testing its reliability. TS Automation does nt allow Stop Limit orders to be placed and I do not like to place limit orders when it comes to stops.
Stop was entered as first 1.9235 traded. I got filled at 1.9212......23 ticks slippage!!!
Problem is, that is reported in time and sales as a legit trade, it is the low. I sold it.
F*ckers, at least that is what I called them on the phone. This is scary, thank God I am only testing it with 1 lot. Not sure that there is a solution really. If Globex is thin what can you do apart from go back to manual confirm?
I am truly b*ll*cked off.

 

[JTrader]

TS Automation does nt allow Stop Limit orders to be placed and I do not like to place limit orders when it comes to stops.

Hi twalker - I'm sorry to hear about this bad experience............................
Why does TS not allow the use of stop limit orders? this type of order would appear to be one of the most popular/sensible order types to use. You would think that stop-limits would be enabled. Is there an inherent difficulty for TS in enabling such an order type?

Thanks again

jtrader.

 

[donaldduke]

If they are not native globex stops then where are they held, on your brokers system or on your PC and
executed by trade station?

 

[TWI]

The stop orders are held locally and sent to the market when the stop price or worse trades.
I think they have just not had enough people request the upgrade for stop limit orders to code it. There is a rumour that these will be available in later versions. There is an option to code limit orders for everything and then if the limit does not get filled in x seconds to go to market but again if you need to take a stop in a fast martket that could really screw you too. I will be working this weekend on coding something to look at the market depth and check the bid offer spread at the time the stop gets triggered as my system will die a death with many more 23 tick slippage trades. The reason I went automated was that I found that with all the other things I was doing the FX trading was incurring too much slippage when I traded it manually.
This is the first week I have gone over to full automation however so it is early days and I expected to find some problems along the way. Hopefully I can list the pitfalls for anyboody else who might be thinking about the same thing.

 

[JTrader]

Hi

So am i right in thinking that it is not possible to use a stop-limit order at present, and market orders are the only order type that can be used in an automated system?

If so, does this mean that there is no mechanism/order type to control slippage?

I am unsure as to how a plain and simple "limit order" can be used in an automated strategy - because at what point would this order be triggered and sent into the market?................With a stop limit - the stop price is hit and the order is sent into the market with a limit attached to it. How does the "limit order" work within an automated system? (hope all that makes sense!)

Many thanks

jtrader.

 

[jimmy1]

TWALKER, are you not trading the stir spreads as much anymore?

 

[TWI]

jt - CME can hold limit orders so those are OK, stop orders however have to be held locally on the machine and go to market when stop price trades. TS have not managed to build in stop limit orders yet.

jimmy1- Yes, most of my trading is still STIRS this is why I am trying to automate the FX as I was missing some signals due to my attention being on the STIRS.

 

[JTrader]

Trade entry and trade exit order type preferences

Thanks twalker

so TS need to enable the limit part of the order to a stop order. It sounds easy enough.

I would want to be able to enter a trade with a limit attached to it - in order to avoid the slippage such as twalkers 23 ticks of earlier on. However, upon exiting the trade, I would want to/be happy to exit the trade with a market order - to avoid a non-fill - when my mechanical system is telling me that the market may imminently turn against me. Do you agree with this reasoning?

Merry Christmas!

jtrader.

 

[JTrader]

Limit v's stop-limit orders - what is the Tradestation difference?

Hi

having thought about it - tradestation not allowing "stop-limit orders" when automating a mechanical trading strategy, but offering "limit orders" is not that big a deal. Because there will be very little difference in the behaviour and outcome of the use of both order types..............

With a limit order, when the criteria was met on the chart, a limit order would be sent into the market to be executed up to a certain price limit or better (best market price). Therefore the alert on the chart would act as the stop...........With a stop-limit order the alert on the chart would trigger the stop (market) order, to be executed at best, with a limit order/price attached to it................

1. Is the above understanding/interpretation correct?

2. What, if anything, is the difference between the two scenarios?

Many thanks

jtrader.

 

[JTrader]

Here is the tradestation response to my question that I asked yesterday.

Question - When are "stop-limit" orders due to be built into easy langauge/tradestation for automation of mechanical trading systems?

Tradestation Representative -
You can code a Stop Limit type order using easylanguage. The system monitors for the stop price and sends a limit order when hit.

Cheers

jtrader.

 

[rog1111]

twalker

very unsatisfactory !

I have watched GBP daily for several hours, for the last 7 months. It is often thin, & I have noticed that it can regularly tick up or down a hell of a long long way before a trade comes in, particularly during non-US hours, therefore these types of stop orders are going to be vulnerable in this type of situation. I have had slippage of a similar order. But what is the solution ? Maybe a OCA stop/stop limit exit order ? (once they have enabled stop limits).

I have also seen many "quote flicks", for example, 0005/07 to 0017/20 and then back again, virtually in the blink of an eye. The big player is still there, but he moves his quotes fast. In general some of the tricks played on Globex / GBP are so blatant that they truly defy belief !

rog1111

Had a stop go in BPH05 this morning at 1.9235. this was at 11:56hrs
I started using automated trading on TS8 last week so have been testing its reliability. TS Automation does nt allow Stop Limit orders to be placed and I do not like to place limit orders when it comes to stops.
Stop was entered as first 1.9235 traded. I got filled at 1.9212......23 ticks slippage!!!
Problem is, that is reported in time and sales as a legit trade, it is the low. I sold it.
F*ckers, at least that is what I called them on the phone. This is scary, thank God I am only testing it with 1 lot. Not sure that there is a solution really. If Globex is thin what can you do apart from go back to manual confirm?
I am truly b*ll*cked off.

 

[JTrader]

Big players v's small mechanical system autotraders

rog1111 -
I have also seen many "quote flicks", for example, 0005/07 to 0017/20 and then back again, virtually in the blink of an eye. The big player is still there, but he moves his quotes fast. In general some of the tricks played on Globex / GBP are so blatant that they truly defy belief !

Hi

If Big Players like this exist in the futures markets, who are able to pay such close attention to detail - perhaps using the market depth/level 2 screen centrally to their strategy, and analysing the market on the micro level, what hope is their for small/smaller players, and particularly smaller players who do not closely follow the market on a micro level (macro level instead) - as instead, they autotrade their system that produces simple entry and exit signals?.....................Besides slippage, what other factors can prove to be a problem for the small mechanical system automating trader?

Cheers

jtrader.

 

[donaldduke]

Back in october I was trading both the GBP and EUR on my automated system.

GBP just didnt feel as good as EUR on globex (ie the liquidity on EUR was so much thicker and
price moves less spikey).

When i compared the GBP Globex chart to the cash chart there were large spikes that didnt exisit in the
cash market.

Those who to enter and exit with limits might find these spikes usefull but most automated
systems use stops to enter and exit.

So EUR is now the only currency i trade on Globex.

In future i might trade GBP but probably through a broker that allows me to trade the cash market.

Also i doubt if TS simulated stop limits are anywhere near as fast as native globex
stop limits, in a fast market you will be trading at a distadvantage to those of us who use
native stop limits.

 

[TWI]

Question - When are "stop-limit" orders due to be built into easy language/tradestation for automation of mechanical trading systems?

Tradestation Representative -
You can code a Stop Limit type order using easylanguage. The system monitors for the stop price and sends a limit order when hit.

jt - This is a classic answer from someone at TS who has never had to use their own system in the market.
If you have a stop that triggers a limit order, the limit order can only be placed for the "Next Bar". Please write back to this idiot and point this out. Only solution would be the ability to place a stop/limit order which triggers at a predetermined price. Globex does support this type of order but some exchanges do not. I assume this is why TS have not considered providing it.

I am trying to work around it with code but due to the "Next Bar" necessity with TS it does look like a dead end or higher risk. Perhaps the best solution is to turn on the confirmation box while in the office with an audible warning to check the depth before submitting and then just hope for the best overnight.
Reason I am testing this platform on BP rather than EC is exactly for this reason. With 1 lot it makes me angry when I see that I was the only trade at 1.9212 either side of trades at 1.9227 but if I was doing this in a 50 lot then it would be disaster. The sooner they can automate the cash or provide stop limit the better and the more costs they will be able to take from the currently terrified users.

 

[MartinD]

yes, unfortunately - even tho globex now supports native stop orders, TradeStation has not implemented them for automated trading (yet).

I have had an enhancement poll running for this very feature for over 18 months on TSW.

The problem is that TS platform holds strategy stop orders locally as a "synthetic" stop and when triggered sends it as a market order. Obviously this is potentially a minefield for traders:
1. risk - you lose your connection or crash your computer then you are IN the market with no stop.
2. speed - a stop held on globex is triggered instantly... a stop on your computer has to received the data, send the order to be received at TS and then sent to globex. in a quick market a coupla hundred milliseconds can mean big slip.
3. margin - BP doesnt have daytrade margin, but the markets that do arent elegible for it because you dont have a working stop in the market.

Allegedly TradeStation are working on providing working strategy stops - but really, there is no genuine reason why they dont have it already - after all, the TS matrix sends working stops, its no stretch of technology for automation to do it.

The real reasons I think TS have not yet implemented real strategy stops are:
1. server power - given the data delays we already get from TS during sudden sharp moves, I suspect that they need some humungous upgrades to their datacentre infrastructure as is. Can you imagine the problems they would have with the sudden additional load of tens of thousands of strategy stops being placed, amended and cancelled? I think they just arent ready to handle it
2. risk. they probably prefer an autotrader to be fully margined because an autotrader is more likely to walk off and leave his system trading unattended.

As things stand, synthetic strategy stops are an inadequate solution but its all we have right now. Hope the imminent release of v8.1 changes that, but I doubt it somehow.

 

[MartinD]

twalker,
you may be interested to know that TS are well along with working on autotrade execution for FX cash and should be released Q1 2005 according to my source.

 

[JTrader]

twalker - If you have a stop that triggers a limit order, the limit order can only be placed for the "Next Bar".

Understood. Although this TS representative did also state -

Currently, you have to wait till the open of the next bar before the trade is placed. This will change in TradeStation 8.1 due out early next year.

MartinD - The problem is that TS platform holds strategy stop orders locally as a "synthetic" stop and when triggered sends it as a market order. Obviously this is potentially a minefield for traders:

When the stop price is hit, the strategy can also then send a limit order into the market, albeit on the next bar, but this is about to change according to my quoted source.

I can see how these seperate processes can create a delay.

It does seem that it is just a matter of time before such improvements are made in terms of functionality of TS orders, and one would expect data delivery matters (servers etc.)also ..............

Cheers

jtrader.

 

[JTrader]

donaldduke - When i compared the GBP Globex chart to the cash chart there were large spikes that didnt exisit in the cash market.

Those who to enter and exit with limits might find these spikes usefull but most automated
systems use stops to enter and exit.

MartinD -
twalker,
you may be interested to know that TS are well along with working on autotrade execution for FX cash and should be released Q1 2005 according to my source.

Due to the added volatility/unpredictability/ thinner liquidity of the futures, without much testing and experience of my own yet to draw upon, I am leaning towards auto-trading EUR/USD on the spot forex instead - seeing this as a safer option (safety in numbers). Despite the wider spreads, and unregulated nature of retail spot forex. What do you think on this matter?

Whether or not i fully automate my mechanical system, even if the retail spot forex market was subject to market manipulation (spikes that were not present on EBS etc.), as a system trader I am likely to benefit from such manipulation as much as I am to suffer because of it. Does this make sense and do you agree with it?

Thanks again

jtrader.

 

[jmreeve]

I have had a play with Ts2000i and automation and decided it was not really viable.
It was never designed for this purpose and has evolved from a bar based, back-testing platform.
Unless they start again from scratch it will always be saddled with the limitations it has inherited.

The best solution is to write your own trading platform in C++. This then gives the ability to code your
own stops with customisable trigger and order placement rules.

 

[JTrader]

jmreeve - I have had a play with Ts2000i and automation and decided it was not really viable.

Hi

yes I've also decided this about ts2000i. I am using ts2000i for practice and learning in TS strategy development, back-testing, optimisation etc - and will then trade live with TS8. I will not fully automate my system until at least TS8.1 - when the "Next Bar" signal issue is to be sorted out.

Cheers

jtrader.