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Stop Limit Offset


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Stop Limit Offset

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  #1 (permalink)
Nashville, Tennessee
 
Experience: Intermediate
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Does anyone use offsets when using a Stop Limit Order ?

I have been intrigued with bracket orders on either side of small consolidation areas attempting to
capture a break in either direction.

So, when you use an offset, this gives you a greater chance of getting filled, because this gives more
than one price to the market assisting in quick moves.

So if you have an offset of +2, it will fill at the price listed or either of the two ticks above / below, correct?

And one more question. It is not possible to get filled at all 3 ticks (3 contracts) , if your initial order
is only for, say , 1 contract ? You will simply get filled at the first available price within the offset .

Danke


AJ
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  #3 (permalink)
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Generally that is correct.

Assuming the offset is +2 and 1 contract traded , a limit order for 1 contract is entered 2 ticks above the market if you are buying, so that is your worst fill.

If the market hits your stop price and immediately pulls back as the limit enters , it is possible to have a postion better than your stop price , this is liquidity dependant so more likely in NQ than ES.

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Market Wizard
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tderrick View Post
Does anyone use offsets when using a Stop Limit Order ?

I have been intrigued with bracket orders on either side of small consolidation areas attempting to
capture a break in either direction.

So, when you use an offset, this gives you a greater chance of getting filled, because this gives more
than one price to the market assisting in quick moves.

So if you have an offset of +2, it will fill at the price listed or either of the two ticks above / below, correct?

And one more question. It is not possible to get filled at all 3 ticks (3 contracts) , if your initial order
is only for, say , 1 contract ? You will simply get filled at the first available price within the offset .

Danke

you didn't believe me huh

but we can make this real easy. we can ask @Fat Tails to take a look.

- when using a stop limit order, an offset is always needed. it could be at the same price (that would be an offset of zero), it could be a positive offset or a negative offset. offsets are calculated in ticks.

- a stop limit order will become a limit order when stop price is triggered.

example: you have a buy stop limit order at 1840 with an offset of 2. if market reaches 1840, your buy stop limit order will be changed into a buy limit order at 1840.50. in a liquid market like ES, it's very likely you'll get filled at 1840 or 1840.25.

the bigger the offset, the better the chance of getting filled. it depends how badly you want your order executed and how much slippage you're willing to accept). if you use a negative offset of 2, then as soon as 1840 is triggered, your buy stop limit order will become a buy limit order at 1839.50. of course now you have a bigger chance of not getting filled. so one has to be careful what strategy he wants to use. especially if you want to use a stop limit order as a stop loss order. something I wouldn't recommend.

as a side note, it's also a good idea to check what kind of stop orders your exchange offer. some don't offer stop market (cme) and some don't offer stop limit orders.

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  #5 (permalink)
Nashville, Tennessee
 
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Silvester17 View Post
you didn't believe me huh

but we can make this real easy. we can ask @Fat Tails to take a look.

- when using a stop limit order, an offset is always needed. it could be at the same price (that would be an offset of zero), it could be a positive offset or a negative offset. offsets are calculated in ticks.

- a stop limit order will become a limit order when stop price is triggered.

example: you have a buy stop limit order at 1840 with an offset of 2. if market reaches 1840, your buy stop limit order will be changed into a buy limit order at 1840.50. in a liquid market like ES, it's very likely you'll get filled at 1840 or 1840.25.

the bigger the offset, the better the chance of getting filled. it depends how badly you want your order executed and how much slippage you're willing to accept). if you use a negative offset of 2, then as soon as 1840 is triggered, your buy stop limit order will become a buy limit order at 1839.50. of course now you have a bigger chance of not getting filled. so one has to be careful what strategy he wants to use. especially if you want to use a stop limit order as a stop loss order. something I wouldn't recommend.

as a side note, it's also a good idea to check what kind of stop orders your exchange offer. some don't offer stop market (cme) and some don't offer stop limit orders.


you busted me !!!

I always try to get as many angles on a subject as possible... but, it seems very clear now...

grazie , my friend


AJ
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  #6 (permalink)
Market Wizard
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I use Stop Limit for entry orders only in certain trade setups. My default setting uses an offset of 2 ticks. So for an entry, I am willing to give the market at most 2 ticks of slippage to get into the trade.

I do not use Stop Limit for stop loss orders however, because more than once when I used it for this purpose, the +2 limit price was hopped and the order was left hanging and not filled. Meaning the Stop Limit was executed but the limit order was never filled and the market kept going well beyond my limit price and the open loss continued to grow in size. In this case, I ended up having to flatten the position manually at whatever price was available. This happens in the thinner markets like CL, YM, TF, NQ.

I suppose sitting here thinking about it, I could try a +4 offset and most likely be filled, but even there it's no guarantee. I always think back to the flash crash type of stop cascade scenario, I would still rather take 10 ticks of slippage with a Stop Market order in that situation and get out of the position as fast as possible, rather than have my limit order hopped and potentially lose $ thousands in a few minutes.

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  #7 (permalink)
Nashville, Tennessee
 
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That is a great point. I made double sure when I was setting up this entry DOM, that the original Ninja ATM's were
not effected by the change to entry Stop Limit orders. Sure enough, the ATM exit stops stayed market while
my entry Stops are now Limit.

I am starting out with an offset of zero. This is not my main setup and I consider it a bit like chasing so
if I am not filled at the perfect price, it's OK.

I like to trade the NQ in the London Globex session into the US open. The slower nature of the PA
may give me a better chance on getting filled on these BO type trades.

It has worked so far in Market Replay where the fills are actually more hit and miss than Live.

Trading Live seems like most everything gets filled.


Thanks for the insight




trendwaves View Post
I use Stop Limit for entry orders only in certain trade setups. My default setting uses an offset of 2 ticks. So for an entry, I am willing to give the market at most 2 ticks of slippage to get into the trade.

I do not use Stop Limit for stop loss orders however, because more than once when I used it for this purpose, the +2 limit price was hopped and the order was left hanging and not filled. Meaning the Stop Limit was executed but the limit order was never filled and the market kept going well beyond my limit price and the open loss continued to grow in size. In this case, I ended up having to flatten the position manually at whatever price was available. This happens in the thinner markets like CL, YM, TF, NQ.

I suppose sitting here thinking about it, I could try a +4 offset and most likely be filled, but even there it's no guarantee. I always think back to the flash crash type of stop cascade scenario, I would still rather take 10 ticks of slippage with a Stop Market order in that situation and get out of the position as fast as possible, rather than have my limit order hopped and potentially lose $ thousands in a few minutes.



AJ
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  #8 (permalink)
Nashville, Tennessee
 
Experience: Intermediate
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Broker: AMP / CQG
Trading: NQ, YM and ES
 
tderrick's Avatar
 
Posts: 1,588 since Sep 2010
Thanks: 4,260 given, 2,529 received

I woke up this morning and a light came on .

I was thinking about your use of the work "triggered" .

It finally dawned on me that the stop portion of the show just gets the ball rolling for the Limit order
to take effect.

Since you can't have a limit order sitting above price to catch a bull break, you must have a stop there
along with a limit. They are actually two things.

I was too embarrassed to tell you I still didn't get what you were talking about over at 9G and I had
used enough of your time. I knew it worked, but I was struggling with the why and how part.

It guess I'm like a carpenter who uses a hammer every day, but has no idea of the molecular structure
of the wood and steel I an wielding.

Thank you for following me over to futures.io (formerly BMT) and holding my hand until I grasped the concept.

grazie



Silvester17 View Post
you didn't believe me huh

but we can make this real easy. we can ask @Fat Tails to take a look.

- when using a stop limit order, an offset is always needed. it could be at the same price (that would be an offset of zero), it could be a positive offset or a negative offset. offsets are calculated in ticks.

- a stop limit order will become a limit order when stop price is triggered.

example: you have a buy stop limit order at 1840 with an offset of 2. if market reaches 1840, your buy stop limit order will be changed into a buy limit order at 1840.50. in a liquid market like ES, it's very likely you'll get filled at 1840 or 1840.25.

the bigger the offset, the better the chance of getting filled. it depends how badly you want your order executed and how much slippage you're willing to accept). if you use a negative offset of 2, then as soon as 1840 is triggered, your buy stop limit order will become a buy limit order at 1839.50. of course now you have a bigger chance of not getting filled. so one has to be careful what strategy he wants to use. especially if you want to use a stop limit order as a stop loss order. something I wouldn't recommend.

as a side note, it's also a good idea to check what kind of stop orders your exchange offer. some don't offer stop market (cme) and some don't offer stop limit orders.



AJ
Nashville, Tennessee


"Life On The Edge of SR"
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