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Limit Orders
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Limit Orders

  #11 (permalink)
Trading Apprentice
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working a limit order gives you the advantage of a fill without crossing the spread, if you're filled. The disadvantage of limits is that if you're right, and you dont get filled, you lost out on a profitable trade.

However, how fast you get filled, and whether price has to trade through you first depends on how "early" you join the bid or the offer.

Search for FIFO order matching on the CME website for a full explanation of how the order queu works.

Are you using Depth of Market? If you aren't, you're trading blind.

Using DOM will allow you to see how many other contracts or shares are bid or offered at your price. That'll give you an idea of whether you are at the front of the queu when price gets to you or whether you'll have to wait.

Example: if there are 1000 bids on the inside price on ES when you place your limit, you basically need to see 1000 contracts trade at your price before you're filled. That basically means you're more than likely going to have to wait for your price to trade through.

Now, if there was only 10 bid when you join, and others join AFTER you (visible on DOM) then you know you'll probably get filled as soon as price touches.

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  #12 (permalink)
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Thank you, RJ

Yes. You are correct. Limit Orders are the preferred price entry point in picking up Market Orders.
Also, thanks to those who mentioned the importance of queue position and depth of market. I now understand the mechanics of order entry a little better.

In my design strategy I have numerous limit order placements similar to the picture below. Whether those get picked up is yet to be determined. The strategy will be automated for speed.

According to the picture, the buy Limit Order is placed at the bottom of a 2 tick bar for entry. The order is placed in advance of the pullback in price. I will wait to see how well the strategy works after it operates under a true market condition.

My data provider is IQ Feed on NT. When Kinetick (same as IQ Feed/ Telvnet) begins operating under NT 7, I may find order entry increases due to removal of the extra layer IQ feed navigates via NT's servers.

The proof will be in the puddin'!

COTtrader
"Ken"





RJay View Post
Hi COTtrader,

I believe limit orders sit in a queue based on price and entry time at that price.

If market orders reach your position in the queue and your offer is accepted by a market order, your in, if not, you get left behind.


Most Futures Markets are single auction markets. Buyers and sellers trade directly with each other.


And Yes, I am definitely a fan of Limit Orders!!!

I use Chart trader to place limit orders. Its great for placing Limit orders directly on the price charts.

Based on support and resistance, I try to calculate where I believe to market is going.

Support and resistance areas can set boundaries for trading a channel.

Also, support and resistance areas are usually tested prior to a breakout to a trend.

I look for these points on the charts.

Limit orders allow me to place an order away from the market where I believe the market will pull back to before continuing.

When the big traders do that nasty sharp hard momentary pullback to stop out the trend traders using market orders, there is my limit order waiting. I gladly take the stop order off the market order trader's hands.

I am more than happy to play his trade for him with a much better entry.

If you believe in limit orders the way I do, don't let anyone make you believe otherwise.

Better fills allow you to use smaller stops.

So what if you miss a couple of trades because you didn't get filled.

The world will not end, and the next trading opportunity is just minutes away.

Just my opinion,

RJay


Attached Thumbnails
Limit Orders-limitorder.jpg  
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  #13 (permalink)
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Few links

Answer
This post has been selected as an answer to the original posters question Answer


https://www.cmegroup.com/globex/introduction/features-and-functionality/elements/matching-algorithms.html
http://www.fma.org/Prague/Papers/MatchingAlgorithmsPaper.pdf
Introduction to CME Globex

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  #14 (permalink)
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Scalpguy,

thanks for posting the documents. You should also post the second document on order matching in th download section!


Just a note on Globex: For CME Globex, all market orders are limit orders, and all stop orders are stop limit orders.

Example for the E-Mini Contract (ES):

ES has a no bust range of 6.00 points. If you enter a market order, slippage is automatically limited to half of the no bust range, which is 3.00 points. So if ES is trading at 1050, and you enter a market sell order, it actually becomes a limit order at 1047. A sell stop order at 1050 is actually a stop limit order with a stop price of 1050 and a limit price at 1047. If markets are extremely volatile and lots of stop orders are being triggered at the same price and cannot be matched, you are therefore running the risk that a stop order is never being executed.


Last edited by Fat Tails; August 22nd, 2010 at 07:26 AM.
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  #15 (permalink)
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Fat Tails View Post
Scalpguy,

thanks for posting the documents. You should also post the second document on order matching in th download section!


Just a note on Globex: For CME Globex, all market orders are limit orders, and all stop orders are stop limit orders.

Example for the E-Mini Contract (ES):

ES has a no bust range of 6.00 points. If you enter a market order, slippage is automatically limited to half of the no bust range, which is 3.00 points. So if ES is trading at 1050, and you enter a market sell order, it actually becomes a limit order at 1047. A sell stop order at 1050 is actually a stop limit order with a stop price of 1050 and a limit price at 1047. If markets are extremely volatile and lots of stop orders are being triggered at the same price and cannot be matched, you are therefore running the risk that a stop order is never being executed.


I'm confused...


I was under the impression that market orders are filled immediately by being matched with the best possible fill from limit orders residing in the "book".

Saying that all CME market orders are limit orders makes my head hurt!!!

Also, why does NT offers a choice of limit orders or market orders when filling stop orders??



My questions...


Are there safeguards in the market to keep from getting a really bad fill???

Are there is a market functions that can convert a market order to a limit order when the market gaps largely in one direction or the other ??

If anyone has answers, I'm interested. please post a link to the info.

Thanks,

RJay

PS: If you put your cursor on the "stop orders" text with the underlines in the previous post wiki agrees with me.

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  #16 (permalink)
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order types

Answer
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http://www.cmegroup.com/globex/files/GlobexRefGd.pdf

Should explain it...

Laserdan
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  #17 (permalink)
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Answer
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RJay View Post
I'm confused...


I was under the impression that market orders are filled immediately by being matched with the best possible fill from limit orders residing in the "book".

Saying that all CME market orders are limit orders makes my head hurt!!!

Also, why does NT offers a choice of limit orders or market orders when filling stop orders??


My questions...


Are there safeguards in the market to keep from getting a really bad fill???

Are there is a market functions that can convert a market order to a limit order when the market gaps largely in one direction or the other ??

If anyone has answers, I'm interested. please post a link to the info.

Thanks,

RJay

CME only offers market orders and stop orders with protection.

CME Market Order with Protection

A market order is indeed matched with the best possible fill from limit order residing in the book. But what happens, if somebody else throws in a large order just milliseconds before you? The large order can cut off several points from the order book, and you get a very bad fill. This is slippage.

CME limits slippage to 50% of the No Bust Range. For example, if you want to sell ES at the best bid of 1050.00 and you put in a market order, it will only be executed, if can be executed at a better price than 1047.00. The part of your market order that could not be executed will remain as a limit sell order on the book.

So CME transforms this market order to a limit order with a limit price of 1047.00. For ES the No Bust Range is 6.00 points, so a market sell order is automatically transformed to a limti order with a limit price = current best bid - 3.00 points.

CME Stop Order with Protection

A stop order is triggered, when the stop price is traded (= last price). If there are few buyers and lots of stop orders are triggered at the same level (news release), the slippage can be huge. Again a stop order, when triggered is converted to a Market Order with Protection, which effectively is a limit order.

This means that a stop is executed at worst half the No Bust Range below the stop price.


Different Type of Stop Orders with NinjaTrader

NinjaTrader works with different exchanges, not all of which have the same order types. Generally there is a stop order (when the stop price is hit, the order converts to a market order) and a stop limit order (when the stop price is hit, the order converts to a limit order). For a stop limit order your need two prices, the stop price and the limit price. If price does trade through the stop price and then immeidately trades below( sell order) or above (buy order) the limit price, the stop limit order may not be executed at all.

Under properties of the NinjaTrader DOM you can select, whether you prefer to use stop market or stop limit orders. If you select stop limit orders, you need to enter the offset for the limit price.

If you have selected Stop Market Order for CME, this will be converted into a Protected Market Order, so it is identical with a Stop Limit Order with an offset of 12 ticks (3.00 points).

Further information on No Bust Ranges can be found here:

Globex No Bust Ranges

I also attach the CME Reference Guide which explains the different types of orders available.

Attached Thumbnails
Limit Orders-cmeglobexrefgd.pdf  
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  #18 (permalink)
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Answer
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'the good is this' :
.............If the order is not completely filled, the remaining quantity rests in the market at the limit price.........
so your orders can be not stopped all in the stop protection range.
Attached is the PDF with No Bust Range and Protection Point for all CME instruments.

Luke.

Take your Pips, go out and Live.
Luke.
Attached Thumbnails
Limit Orders-pricebanding.pdf  

Last edited by LukeGeniol; August 22nd, 2010 at 03:30 PM.
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COTtrader View Post
Using Limit Order trading only, is it fairly common for a Limit Order whose price is not crossed to get picked up sometimes, more than sometimes, often? What say ye?

Does this actually work these days? is there a strategy based on this approach?

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szko View Post
Does this actually work these days? is there a strategy based on this approach?

You probably misunderstood what the OP (8 years ago!) is asking. The question is simply, "is it common to get a fill at the bid without that price going offer, and, is it common to get a fill at the offer without that price going bid?" The answer is this: there's always some price that is a local minimum or maximum, and while sometimes every order at that price is filled, sometimes there are orders still in the queue at that price. These are sometimes referred to as "magic fills," where you are bid, get filled, and never take a tick of heat. Depending on the product, your strategy, and pure randomness, yes, this will happen sometimes. There is no strategy to be found here; this is basic market mechanics.

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