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Simulated Stops on FDAX ?


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Simulated Stops on FDAX ?

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  #1 (permalink)
 jtrade 
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As I refine my entries with a range bar chart, recently reduced from 8 to 5 ticks, I find my stops getting smaller and smaller. Whereas my ATM used to be set to a -21 stop, it's now set to -13 and often my trade failure point ("TFP") is as little as -6. If you look at my only trade so far this morning on the attached chart, you'll see I took an H2-style entry at 6320.5 : my TFP ws one tick below the swing low of the prior bar's low, ie. 5 tick range bar, therefore 6 ticks away.

I have tended to delay moving my hard stop to the TFP for as long as possble, but occasionally this works aganist me as FDAX can make fast & sudden moves. Today I decided to just place my stop where I wanted it. So now I'm thinking that perhaps I should use Ninja's Simluated Stops, which I used to use years ago when I traded ER2 during the US morning session.

Is anyone using these with success, please ?

I understand the risks of holding a simulated stop on one's own machine. However, there is not that much info on them in Ninja Help, so I wonder for example if one drags one's stop, does it remain in SS mode but also adjusts the hard stop at the exchange ? For example, say I set my ATM wth a SS @ -8 & -21, ie. the stop is queued at Eurex @ -21, but will execute if -8 is hit (any idea what volume trigger parameters I should use ?) - if I then drag the stop to -6, will the "real" order stay at -20, or will it move to -18 ?

I'd be very grateful for comment from anyone who has practical experience of this, please ?

PS. I'm using NT 6.5 until NT7 comes out of beta, ie. for the foreseeable future (!).

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 Fat Tails 
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jtrade View Post
As I refine my entries with a range bar chart, recently reduced from 8 to 5 ticks, I find my stops getting smaller and smaller. Whereas my ATM used to be set to a -21 stop, it's now set to -13 and often my trade failure point ("TFP") is as little as -6. If you look at my only trade so far this morning on the attached chart, you'll see I took an H2-style entry at 6320.5 : my TFP ws one tick below the swing low of the prior bar's low, ie. 5 tick range bar, therefore 6 ticks away.

I have tended to delay moving my hard stop to the TFP for as long as possble, but occasionally this works aganist me as FDAX can make fast & sudden moves. Today I decided to just place my stop where I wanted it. So now I'm thinking that perhaps I should use Ninja's Simluated Stops, which I used to use years ago when I traded ER2 during the US morning session.

Is anyone using these with success, please ?

I understand the risks of holding a simulated stop on one's own machine. However, there is not that much info on them in Ninja Help, so I wonder for example if one drags one's stop, does it remain in SS mode but also adjusts the hard stop at the exchange ? For example, say I set my ATM wth a SS @ -8 & -21, ie. the stop is queued at Eurex @ -21, but will execute if -8 is hit (any idea what volume trigger parameters I should use ?) - if I then drag the stop to -6, will the "real" order stay at -20, or will it move to -18 ?

I'd be very grateful for comment from anyone who has practical experience of this, please ?

PS. I'm using NT 6.5 until NT7 comes out of beta, ie. for the foreseeable future (!).


Simulated Stops

There are several reasons to use simulated stops

(a) EUREX does not support stop-limit orders. So you can simulate them locally, if your broker cannot do that.

(b) Your broker is not aware of your stop levels.

(c) You do not pay order fees (My broker charges an order fee of EUR 0.50 against an execution credit of EUR 2.50 for EUREX)

(d) You can use a volume trigger with NinjaTrader.


Evaluation

(a) I never personally use stop-limit order as stop-loss orders.

(b) I do not mind. The stop order is not in the visible order book of EUREX. That is good enough for me.

(c) I do not mind either.

(d) This would be the only valid reason for me to use simulated stops.


Solution

I always put a hard market stop at the exchange. This also works, if my PC, internet provider or broker has a technical problem. So I always have a fixed bracket.

Sometimes I add a second stop inside the bracket for part of the position. When adding this to a running strategy, NinjaTrader will automatically reduce the number of contracts for the large bracket, when this stop is hit. The inner stop I use, also is a hard stop.

With the notoriously high volatility of FDAX the only feasible solution is to use wider stops. This is actually what makes FDAX quite interesting to trade. You get a lot of volatility for your buck , but you also need the bank account to trade several contracts with wider stops without hitting your maximum risk allowed.

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 jtrade 
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Fat Tails View Post
(b) I do not mind. The stop order is not in the visible order book of EUREX. That is good enough for me.

Guten Morgen Herr Fat Tails & thank-you for your thoughtful response.

So, unlike most/all US futures exchanges, the stops cannot be seen ? I thought that was the whole point of a visible order book - clearly there is something I am not understanding / knowing, but if what you say is correct, then I can forget about Simulating my Stops .


Quoting 
With the notoriously high volatility of FDAX the only feasible solution is to use wider stops.

This is indeed a sensible view, but I am endeavouring to only take those entries where my TFP is very close as per my example. Someone else might disagree, but then they are evaluating their chart in a different way.

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 Fat Tails 
Market Wizard
Berlin, Europe
 
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jtrade View Post
Guten Morgen Herr Fat Tails & thank-you for your thoughtful response.

So, unlike most/all US futures exchanges, the stops cannot be seen ? I thought that was the whole point of a visible order book - clearly there is something I am not understanding / knowing, but if what you say is correct, then I can forget about Simulating my Stops .

This is indeed a sensible view, but I am endeavouring to only take those entries where my TFP is very close as per my example. Someone else might disagree, but then they are evaluating their chart in a different way.

The visible order book only contains limit orders. So if you look at your DOM, all what is there is limit orders.

A stop order is hidden for all traders, as long as the stop is not hit. Once the stop is hit, it is either immediately executed as a market order (case stop market) or it is added to the order book as a limit order (case stop limit). In a similar way iceberg orders that generate child orders are hidden from the market participants.


The broker knows your stops

Now of course there is a risk. All your orders transit via your broker, so obviously your broker knows where your stops are. If the broker is unfair, he may well use a special software to detect heaps of stops, communicate this information to his propietary trading department and then trade against you. With most of the larger brokers the risk that this may happen is very small.


Forex Retail Brokers and CFD Brokers

But now imagine FOREX retails brokers and CFD brokers who run their propietary software. If you trade with them you are not on a regulated exchange with a Central Counterparty, but you are effectively setting up private contracts with a counterparty, who happens to be the broker. And for sure their software - for example MetaTrader - allows to evaluate where the retail customers locate their stops. Starting from here, these retail brokers can effectively trade against their customers by adjusting the bid/offer spreads or by taking outright positions. So if you trade FOREX, you should preferably select an ECN broker, who provides access to a third party market place.

But with EUREX, we guys are too small that anybody will try to hunt our stops.

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