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Shorting futures is the safest way to trade them intraday.
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Shorting futures is the safest way to trade them intraday.

  #21 (permalink)
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wkniemann View Post
Hello BigMike et al,

I'm trying to develop a trading philosophy for intraday futures (like the emini S&P). I know how dangerous this can be.

So, my first inclination is to only go short because if one
is long, and a 911 or Isreal attacks Iran happens, the
longs are really in trouble. Sellers by the thousands try
to get out to protect themselves. Stop losses are useless. Exchanges could even be shut down for days. Not for me! There are plenty of short opportunities intraday.

What say you?

Bill Niemann

I am sorry for the sarcasm but seriously I thought I was dumb. It feels a lot better now.

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  #22 (permalink)
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grimReaper View Post
Your stop can be jumped.

How so? The only thing I can figure is if the order is filled outside of the no-bust range, which for ES is 12 ticks to either side of the order, in which case the order can be busted.

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  #23 (permalink)
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Stop market order can jump in a fast moving market up to the threshold you specify or your platform specifies. I think for example NinjaTrader defaults to 4 ticks on a stop market.

On another note, CME has a "market order protection" scheme in which market orders will only fill if the spread is less than half of the maximum allowable daily range, I believe.

Generally speaking, all this discussion of orders is not how to be safe. You are safe by developing a smart portfolio and being diversified, not by choosing a particular order type or by trading only a single direction.

Mike

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  #24 (permalink)
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Big Mike View Post
Stop market order can jump in a fast moving market up to the threshold you specify or your platform specifies. I think for example NinjaTrader defaults to 4 ticks on a stop market.

This would be a stop limit, not a stop market--stop market has no threshold allowances, only the guarantee on CME which you mentioned, that I mentioned earlier, the no bust range, which for ES is 3 handles (half the no-bust range of 6 handles).


Big Mike View Post
Generally speaking, all this discussion of orders is not how to be safe. You are safe by developing a smart portfolio and being diversified, not by choosing a particular order type or by trading only a single direction.

I agree Mike, but this is mainly applicable to traders who are holding positions at least overnight, and the OP is asking about intraday trading. I have only ever seen super massive moves in ES when a known news event like NFP is occurring and liquidity is guaranteed to be thin. For a genuine emergency, which is not known in advance, there is perhaps a sharp move down, but there should not be an immediate liquidity vacuum as traders and computers alike would not be synchronized with one another; in other words, ample time and liquidity for a stop to trigger as expected.

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  #25 (permalink)
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josh View Post
This would be a stop limit, not a stop market

Yes of course, it's been a very long day and I am doing too many things at once it seems

I didn't see your earlier reply on the CME no bust range.

Mike

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  #26 (permalink)
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josh View Post
I agree Mike, but this is mainly applicable to traders who are holding positions at least overnight, and the OP is asking about intraday trading. I have only ever seen super massive moves in ES when a known news event like NFP is occurring and liquidity is guaranteed to be thin. For a genuine emergency, which is not known in advance, there is perhaps a sharp move down, but there should not be an immediate liquidity vacuum as traders and computers alike would not be synchronized with one another; in other words, ample time and liquidity for a stop to trigger as expected.

Only need to go back to the May 2010 flash crash to see an intraday event. If your entire portfolio was in ES futures that day, you could have really been hurt. But if you traded 10 products each with lets say 10% allocation to keep it simple, the damage would have not been as bad, assuming you picked some uncorrelated markets.

Ernie Chan recently talked about this in-depth:
Webinar: Ernest Chan - Capital Allocation and Risk Management

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
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  #27 (permalink)
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tgibbs View Post
That doesn't make your stop useless though, typically it turns to market order and fills at a crappy price. What the OP is talking about, or the way I took it, is that whatever you are trading would slide so hard and fast that your stop wouldn't get filled even at a market offer. That's why I say for price to move there has to be buyers and sellers. Bid and ask may spread some and give crappy fills but I'm thinking a 50 tick move would be pretty major and that shouldn't clean out an account. But I have been wrong before

Market orders are protected on CME. Read more:
Market-With-Protection Order Definition | Investopedia
Globex No Bust Ranges


josh View Post
How so? The only thing I can figure is if the order is filled outside of the no-bust range, which for ES is 12 ticks to either side of the order, in which case the order can be busted.

Precisely, no bust. Say the bid book 3 points deep is 15k contracts and you have a 3 point stop. Catastrophic event X happens. Sophisticated traders cancel all bids, I'm guess by some automation via Bloomberg, leaving say 500 contracts of retail and slow or uninformed traders on the bid. This sparse liquidity disappears in milliseconds, and if you're not not filled (likely), you're now a limit order. But 1.5 seconds later when you realize what's going on and spit out your coffee, market's down 13.25 points and dropping. And this is assuming your feed and platform don't freeze.

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  #28 (permalink)
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I've seen the market during the flash crash and similar events in the last few years. It's almost as if the market was 100 times normal speed in market replay. The price started to drop off in a parabolic shape giving you some time to get out, It didn't just randomly gap on one candle. TBH, As a day trader events like these can turn into fortunes if you use a stop loss without a preset limit in the direction of the move. Maybe someday price can make such a sharp jump who knows. I wouldn't suggest keeping all of your trading money in your trading account anyways. You should only keep what you need for marginal reasons and the rest can be parked elsewhere. If for whatever reason your stop got missed to the point your account got a margin call or worse that's really your brokerage's fault at that point.


Last edited by Itchymoku; January 30th, 2013 at 05:06 AM.
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