I was wondering if I could get some info from some live traders who trade the ES. This question has, no doubt, been asked before but would like some tailored advice if you guys wouldnt mind!
I have been backtesting by hand a strategy that has a 3 tick SL and 5 tick TP. All orders would be bracketed with the ATM manager. Now, for the the most part, my strategy replies on the fact that the ES is a relatively thick market and, to my understanding, price must move through your order level to fill. The problem I have when forward testing on Ninja Sim is that my stop loss orders, which are stop limit (again, to my understanding as stop market SL is false in the properties window), seem to fill immediately when touched while my TP limit orders fill in the expected manner.
Is this to be expected when trading live or would stop limit SL orders require a movement of price through the order level as per the usual Limit order? Also, what would your general sense of fill rates be in live for your order sizes, e.g. 1 vs 5 vs 50 clip fills. Knowing that the exchange is FIFO i would guess that moving the SL (refreshing it) would lessen the chance of a fill until price moves beyond the level. I am a total rookie when it comes to live and would like to have a sense of what to expect before risking cash if possible. On the other hand $40 a trade isnt to bad to test it out :P
Ahh I think I had the logic behind a Stop-limit wrong. Correct me if I'm wrong, if in a long position with a Stop-limit (SL) at 1450, once that level is hit it places a Sell limit at 1450 or above, correct? In that case is there a way to ensure my stop loss would only be executed only if price moves beyond the SL level (limit type fills). I would think a market order would be executed instantly on the ES, as with any other less liquid market, so that's not the option Im looking for. I will check out the Simulated stop loss order you mentioned in the mean time. Thanks
not really answering your question per se, but I always define a profit target that way exceeds any normal slippage because I don't want to have to be constantly "counting pennies". Under normal market conditions in CL you're going to get filled within a couple ticks.
Now abnormal market conditions. You don't want to be relying on stop losses. I'm talking about things like limit moves. You need to use puts and calls to protect yourself. The way I do it is when a new contract month rolls around, I buy OTM puts and OTM calls that approximately half the limit from current trading price of the futures. This will basically start limiting losses to about half of what they would be if a limit move occurs.
This is in addition to stop losses, but during a limit move, stop losses may not help you much. They could end up getting filled at the end of the move (if at all) and end up doing more damage to your account if prices then reverse.
sometimes in the markets, the bid/offer will instantaneously jump from its current price to somewhere several hundred ticks away. This usually due to unexpected impacting news. Your stop market order will unfortunately get filled several hundred ticks from where you had it. You could actually end up being wiped out in a couple minutes.
Yeah probably a lot of people will say this is overboard, but if you trade for long enough it is guaranteed you will experience huge instantaneous price movement and if it's against you, then you're pretty well screwed. So in my opinion the premiums on the options are well worth it.
Last edited by mwtzzz; February 8th, 2013 at 10:24 PM.
Simple answer is: Stop limit order becomes a limit order when stop is touched, so it would be executed like any limit order is, that is a bid/ask must be there at your sell or buy price in order to get filled.
When you set this up, are you giving 2 prices for the stop limit order? If you are only giving one price, then you are only doing a simple stop loss order.
Here is an example:
Price is at 1460. Your are long
You put a stop loss in at 1450. If 1450 is hit, then your order immediately gets converted to a market order, and you are filled at the prevailing market price. Usually this will be at 1450, very rarely above 1450, and occasionally below 1450.
You put a stop limit in at "stop 1450, limit 1445." If 1450 is hit, then your order immediately gets converted to a limit order to sell at 1445 or higher, so usually it will fill around 1450, but always above 1445. This guarantees you that you'll get a price of 1445, or no fill at all.
The "no fill at all" part is the scary part. Let's say you have a stop limit order of "stop 1450, limit 1445." Right at 1450 the market collapses, and the price drops down to 1300. Since your order is now a limit to sell at 1445 or higher, you will not get filled at all. If the price then goes to 0, you'll still never get filled. That is the risk of a "stop limit" order.
Most times, you are probably better off with a simple stop order. You may get a lot of slippage, but you will get filled at the market.
Hope this helps!
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A lot of people don't realize that prices don't have to flow smoothly. During high news events or other shocks to the market, the bid/offer cluster may jump instantaneously from one place to another place that can be several hundred ticks away, completely bypassing everybody's "stops" that are in between.
Let's say you are short crude oil at 97.00. You place a stop loss (market order) at 97.50. Let's say prices are trading around 97.20. Then something happens and suddenly the bid/offer goes from 97.20 to 101.00. Now bids are at 101.00 and offers are at 101.05.
You're stop loss order will get filled at 101.05 or worse. Nowhere near the 97.50 you were expecting.
What I do, is in addition to normal stops, I also purchase a call and a put each month (I trade futures) and I hold these through the month. I let them expire. I dont' try to trade them or make money from the. Their purpose is to limit losses in case drastic market moves. You obviously have to make several times more in trading profits than the cost of the option premium for that month, but as long as you're doing that, it's worth the expense.
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think bigger, hold longer, wider margins
think bigger than 3 tick stop loss on ES
--- $37.50 is tight no matter what contract you're talking about, and 3 ticks, on ES, what with 4 ticks = 1 point = $50 is way, way, way too tight and should be expected to be hit 90+% of the time
--- that realistically leaves less than a 10% opportunity or window to achieve success, and success being defined as $62.50 = 5 ticks = really isn't that much success
hold longer or go home,
--- think in football terms, you snap count on scrimmage and drop back into the theoretical pocket hoping your defensive line holds and your QB can spot an open hand held high to hit....
--- feel the tension? that's what its like after getting executed live, and holding short/long position that reverses on you. Can you turn things around? Did you enter position too soon? Did you enter a defined trend (essentially chased the market) with sufficient room to benefit?
with that in mind, rethink your goals, from a realistic perspective....
using your initial settings, plan on 6 tick = $75 stop loss
using your initial settings, plan on a 6 tick target = $75, which means it will most likely show +$87.50 (7 ticks)
if you can't afford, or plan on those levels, then perhaps another contract in the $5 per tick range might be more suitable?, yes?
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