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Very quick question. If I short at level 1, and have a limit order as a target at level 2, but price gaps past this to level 3, does my limit order get activated at level 3?
Can you help answer these questions from other members on NexusFi?
There's no general answer to your question since it depends on your position in the queue.
Esp in the presence of AMM, EMM, and (other) HFT systems it boils down to the question who
gets a/the fill and who is left out in the cold.
With stocks, ETFs etc. that are also traded in different exchanges and/or (dark) pools it is much
more complicated. Even regulators like the SEC normally need a lot of time and effort to sort out where
and why one got a fill at a certain limit.
If you are interested in the basics of the CME matching algorithms - i.e. the implementation of the rules - there
are some introductory videos with examples:
The answer is NO, but your order is still valid at level2, as soon the price comes back to level2 your order should be filled, but of course in this case you can flatten the position with a better price
... ok .... so if I want to catch prices falling through my level and I am ok with the slippage (positive in this case), am I best off with a market order at my target?
In this case a "SELL STOP" would give you the opening price (or close to that). I don't hold trades overnight, so I always use Limit-orders for my target.
Ooops, this is wrong, Market If Touched, should be the correct order
NO....A limit order is correct. A limit order will fill at your limit price OR BETTER. If it gaps through your price you will be in the queue based on priority (price then time).....so all the limit orders at your price will be filled in order of time placed...then the next price and so on. you may not get the open price but you will probably get your price or better (positive slippage). Just remember the matching engines at the CME only accept LIMIT orders....even market orders are simulated by internally placing a limit order with a huge limit offset (like a gap in your example).
Also a market if touched order will not sit on the CMEs matching servers.....it will be on your brokers servers so you do not have a place in line until the market order is submitted when the price is touched (which is just a limit order with a wide limit to the matching engine anyways). So you will probably be filled first with the limit order then with a MIT order in your example.
