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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: 3 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: 3 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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  #4 (permalink)
 glennts 
Corpus Christi, TX / Westcliffe, CO
 
Experience: Advanced
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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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  #5 (permalink)
Mattio
Boston, MA
 
 
Posts: 3 since May 2015
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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 
Corpus Christi, TX / Westcliffe, CO
 
Experience: Advanced
Platform: NinjaTrader
Broker: DDT / Rithmic / Kinetick / IQ
Trading: 6E
 
Posts: 193 since Oct 2010
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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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