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the probability of market orders getting filled in less than 300 volume contracts
this is the first post here. I'm a beginner to futures, I was exploring the calendar spreads on currency futures in a demo account and noticed that back month contracts have a very low volume of 200 to 500, I wonder if when I go live I won't get difficulties in getting my orders to get filled (market orders ) when I try to close the back month at market order in such low volume contracts assuming that I trade only 1 contract in each leg also assuming that I leg in when I enter ?
thank you
Can you help answer these questions from other members on NexusFi?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Probably depends upon what you mean by back months.
FYI Currency Forwards are arbitrable versus the interest rates. So the forward rate is just the spot rate * (interest rate 1/interest rate 2). So the spreads only move when the interest rates move. Since its arbitrable there's normally some algo out there that will keeps the back months in line - and also at a price better than displayed on the screen.
thanks 4 the reply,
I mean the contract month is just next to the front (current month). what I`m interested in, is whether it is difficult to enter the leg of back month contract and exit it at market order when the volume displayed of those back months
is as low as 200 to 400 even if I only trade 1 contract in each leg ( contract month ), for example, I want to buy the spread of EUR/USD when I noticed that the spread between the front-month contract (March) and the back month contract (June ) is wide and the market is in contango, I bought 1 march contract at market price 1.0712 and simultaneously sold 1 June contract also at a market price 1.o768 expecting the spread between the 2 contract months to narrow or to flatten a bit. the volume in the front month contract (march) when I entered the trade was 284 638 but the volume of the back month (June contract) was only 271.
of course both orders got filled since it is a demo account, what I want to know is whether I will encounter difficulties to get my orders filled,I mean those of back month contracts with so such low volume if the trade I mentioned in this example was executed in a live account, both when I want to enter and when I want to exit.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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Couple of things here.
1/ EUR:USD or 6E is in contango because US rates are a lot higher than EUR rates.
2/ 6E has exchange listed spread contracts. in almost every case I have ever seen the exchange listed spreads will give you better fills than legging the individual months. If you pull those up you will see that most are 1 or 2 ticks wide, hundreds of contracts up.
3/ If you check the Globex Product Reference Spreadsheet (available here), select "FX Products", look for EUR/USD or 6E and go over to column H "Implied Engine" you will see "No". This means that the implied engine IS NOT switched on. Which means if you trade the back months as outrights you are almost guaranteed to be getting an off market price. You definitely do NOT want to be using market orders in anything other than the prompt/most liquid months.
thank you SMCJB for your replies, I really appreciate that. as I said before, I`m trying those calendar spreads in demo accounts, first with Insigniafutures and then Ninjatrader, I couldn't find any listed spreads on both of them, so I had to leg in. then I had that idea that perhaps leging in ( entering both contracts as outright) has some advantages because I can at some point convert the spread position into outright .i.e closing the winning leg and giving the losing one some time to reverse especially when I see a good probability of reversal patterns and thought that this can't be done if entered the spread at once, or am I wrong ??
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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A lot of more retailed focused brokers/software don't have access to the exchange listed spreads. I know Tradestation doesn't either. No offence meant, but that sounds like a great way to lose money quickly.
thanks, SMCJB, I hope you can give some of your precious time to explain this to me; suppose that I want to enter a position where the volume is so low and saw that the bid size is 8 and also ask size is 8 meaning
that there are 8 contracts on each side waiting to be matched at those prices right? if so, my 1 contract has a good chance to be matched with one of those listed since I only trade 1 contract, right?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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Posts: 5,049 since Dec 2013
Thanks Given: 4,384
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Your question is not clear. Are you hitting a bid, lifting an offer, or placing a limit order?
There are different matching engines, the most common though is FIFO or "First In First Out", where the orders are processed first by price and then by time. So yes if your order is there first it would get filled first. If your order is at the same price but arrives after the 8 lot order, then you will only get filled after the 8 lot order.
That Globex Reference Sheet I linked to earlier lists the matching engine in column K. EUR/USD or 6E is "F" which is "First In First Out"
