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What timeframe for 99% limit order fill rate? (ES/NQ)


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What timeframe for 99% limit order fill rate? (ES/NQ)

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  #1 (permalink)
Mattio
Boston, MA
 
 
Posts: 6 since May 2015
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If you are trading ES or NQ, and placing limit orders based on the close price of the bar that generates the signal, what time frame would you need to be on to get almost a 100% fill rate? 5 minute bars, 30 minute bars, 2 hours? Thank you

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  #2 (permalink)
 glennts 
Corpus Christi, TX / Westcliffe, CO
 
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The only way to insure a 100% fill on a Limit order is if price moves at least 1 tick against your intended direction. If price doesn't move at all against your Entry then you are dependent on the variables of queue position and Mkt depth for getting a fill. You are assuming that there is a particular time frame bar that has unique behavior compared to other time frame bars regarding how each bar behaves on its Open relative to the prior Close and this is not the case. Most bars will have wicks and tails and anyone of those will get you filled if your order is place at the level of the prior Close. The higher the time frame the more likely the wick / tail length will be greater that lower time frames and the more heat you will take after your 100% guaranteed fill. Create an indicator that de-trends price against the prior Close to see this for yourself.

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  #3 (permalink)
Mattio
Boston, MA
 
 
Posts: 6 since May 2015
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glennts View Post
The only way to insure a 100% fill on a Limit order is if price moves at least 1 tick against your intended direction. If price doesn't move at all against your Entry then you are dependent on the variables of queue position and Mkt depth for getting a fill. You are assuming that there is a particular time frame bar that has unique behavior compared to other time frame bars regarding how each bar behaves on its Open relative to the prior Close and this is not the case. Most bars will have wicks and tails and anyone of those will get you filled if your order is place at the level of the prior Close. The higher the time frame the more likely the wick / tail length will be greater that lower time frames and the more heat you will take after your 100% guaranteed fill. Create an indicator that de-trends price against the prior Close to see this for yourself.

I may have left out an important detail. I would be ok with the order filling at any point during the following bar (or any subsequent bar as long as it was filled before the price moves significantly in the opposite direction and I get the opposite signal (strategy has symmetrical parameters)). It doesn't necessarily have to be right away. So if I had a signal generated by a 30 minute bar and placed a limit order at that close price, I feel like almost always it's going to hit that price again at some point in the following 30 minutes. Where that actual percentage is, I don't know (and that's what I'm asking). You are definitely right that it's a great idea to backtest with the setting that the price must move 1 tick past in order to fill. However, I am wondering what people are seeing in the real world. I am just getting back into this after a long break and I seem to recall missing fills on 1 minute bars but I'm a little foggy. Thanks

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 glennts 
Corpus Christi, TX / Westcliffe, CO
 
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If you have confidence in your strategy then try a Limit order of Bid + 1 tick or Limit Ask for longs or Limit Ask - 1 Tick or Limit Bid for shorts. I use the Limit +/- tick approach to avoid chasing the other side. Consider adjusting this to the instrument's behavior. The NQ is quite jittery and you might find you can get a favorable long entry using the prior Close - 2 or 3 ticks. While the ES, because it is thick, you can just hit a Market order and would not likely have any slippage.

Below compares the ES and NQ 1 Min and the 5 Min bars against the prior bar's close. The white horizontal is the prior close.





There is a lot of useful information that can be extracted from these types of studies. For example, how many consecutive up / down closes are likely to happen before you get a correction. Notice on the 1 Min charts that the extreme spikes in the closes are almost evenly spaced...looks to be @ 15 +/- bars and that following most of these momentum spikes is a close in the opposite direction... that is worth digging into.

Good luck from someone who was born in Cambridge and shined shoes in Harvard Sq. as a kid.

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Mattio
Boston, MA
 
 
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glennts View Post
If you have confidence in your strategy then try a Limit order of Bid + 1 tick or Limit Ask for longs or Limit Ask - 1 Tick or Limit Bid for shorts. I use the Limit +/- tick approach to avoid chasing the other side. Consider adjusting this to the instrument's behavior. The NQ is quite jittery and you might find you can get a favorable long entry using the prior Close - 2 or 3 ticks. While the ES, because it is thick, you can just hit a Market order and would not likely have any slippage.

Below compares the ES and NQ 1 Min and the 5 Min bars against the prior bar's close. The white horizontal is the prior close.

There is a lot of useful information that can be extracted from these types of studies. For example, how many consecutive up / down closes are likely to happen before you get a correction. Notice on the 1 Min charts that the extreme spikes in the closes are almost evenly spaced...looks to be @ 15 +/- bars and that following most of these momentum spikes is a close in the opposite direction... that is worth digging into.

Good luck from someone who was born in Cambridge and shined shoes in Harvard Sq. as a kid.

Those are some interesting thoughts. I was definitely apprehensive about using market orders in a strategy that works on bars as low as 1 minute, but it's worth live testing. You know you're always going to get a fill and that would at least make your trade frequency the same as backtesting. I could mess around with seeing if the strategy survives one tick slippage in backtesting or the requirement to move 1 tick past for limit orders. What kind of Net Profit:Max Drawdown ratio are you guys shooting for before going live with a rules-based strategy? (I know that a lot of other factors go into it too.)

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 glennts 
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Mattio View Post
Those are some interesting thoughts. I was definitely apprehensive about using market orders in a strategy that works on bars as low as 1 minute, but it's worth live testing. You know you're always going to get a fill and that would at least make your trade frequency the same as backtesting. I could mess around with seeing if the strategy survives one tick slippage in backtesting or the requirement to move 1 tick past for limit orders. What kind of Net Profit:Max Drawdown ratio are you guys shooting for before going live with a rules-based strategy? (I know that a lot of other factors go into it too.)

Slippage with a market order is an expression of B/A depth. With the thinness of the NQ you will almost always get at least a 1 tick and when using a Stop Market on a break of obvious S/R you should not be surprised to see much more that that. B/A depth at any level is going to be the same for any size bar so trying to minimize slippage by using bar size is misleading. What can be a factor is using the break of a popular size bar, 5 min for example, to trigger a market order. If many others are doing the same thing then slippage is more likely. Depending on your method you might consider odd size bars. If 5 mins is a good idea would 4 mins or 6 mins or even 200 sec work just as well?

Also, if the success of your strategy is dependent on 1 tick then you need to develop a different approach.

My trading is purely discretionary so I have no opinion on backtesting and the associated metrics.

Good luck, Be Careful

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Mattio
Boston, MA
 
 
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glennts View Post
Slippage with a market order is an expression of B/A depth. With the thinness of the NQ you will almost always get at least a 1 tick and when using a Stop Market on a break of obvious S/R you should not be surprised to see much more that that. B/A depth at any level is going to be the same for any size bar so trying to minimize slippage by using bar size is misleading. What can be a factor is using the break of a popular size bar, 5 min for example, to trigger a market order. If many others are doing the same thing then slippage is more likely. Depending on your method you might consider odd size bars. If 5 mins is a good idea would 4 mins or 6 mins or even 200 sec work just as well?

Also, if the success of your strategy is dependent on 1 tick then you need to develop a different approach.

My trading is purely discretionary so I have no opinion on backtesting and the associated metrics.

Good luck, Be Careful


I meant to thank you for this information but things got really crazy at work/home and I'm just now working on my strategy again. It's really interesting what you said about market orders working well on ES. I'm thinking about trying my strategy on ES with market orders on 10s bars/frequent trades. I'm hoping there won't be too much slippage where it kills profits. I imagine the latency of my pc/internet could come into play.. You still a Boston sports fan? Go Bruins!

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 glennts 
Corpus Christi, TX / Westcliffe, CO
 
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Mattio View Post
I'm thinking about trying my strategy on ES with market orders on 10s bars/frequent trades. I'm hoping there won't be too much slippage where it kills profits. !

10 sec bars is pretty far down into the noise so you will need to have a high confidence on what is the underlying trend.... for a 10 sec time frame that trend is going to @ 5 mins. What may be of value is to notice that there is a 90 sec rotation... so 10 sec bars will tend to have a consolidation/correction within a 90 sec time period. I'm putting together a chart to illustrate this. What this suggests is that you will want to see a higher @ 9 bar low out of what you think is THE low before entering a long trade.

If you can see this 9 bar cycle ( some people can't ) then create a 90 sec chart, filtering out the 9 bar cycle, and observe what the rotation is on that now higher time frame... and repeat the process moving up through time. This will give you an understanding of the larger trends that are determining what is going to happen to your trade on the 10 sec chart.

Chart to follow in a few minutes.

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 glennts 
Corpus Christi, TX / Westcliffe, CO
 
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using the Ruler measured the bars and divided by the instance to get the average duration... which in this case is 10 bars. On the left I inserted a 9 bar rotation to break up the 18 bar count and you can see there was an obvious consolidation after the 9 bar count. It should also be clear that you need to be aware of the higher time frame swing that is going to determine how the 10 sec bar behaves.

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 glennts 
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This is the same chart showing a wide window. Added are a white dotted 10 period SMA, a Black line which is the 5 min ma as plotted on a 1 min chart and a Yellow line which is the 15 min ma as plotted on a 1 min chart.... ( xcMovAvg ). You can see on the left that there is a larger rotation that is fairly consistent in its duration of @ 15 min. It should be apparent that this rotation is what determines the trend of the 5 min (black ma ) and it is the trend of this yellow ma that determines if the 15 min rotation yields higher highs and lows or lower highs and lows. So, keeping it simple. If the 5 min is above the 15 min then the dominant trend is going to be higher and if you are trading down in the 10 sec time frame, being aware of and respecting this relationship is what is going to influence the outcome of your trades. The same is true when the Black 5 min is below the Yellow 15 min. Notice the best opportunities are when price breaks the 5 min and tests the 15 min.

The sub-graph shows price detrended ( subtracted from ) the 10 period SMA. You can see that the distance price moves away from the zero line, which represents the 10 period ma of price, is reasonably consistent. Useful information if you are scalping.

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