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Simulated Entry and Stops

Listen to an audio presentation here.

A simulated Entry or Stop is where NT simulates the stop trigger on your local PC before activating the order in TWS. A stop order simulation can use NinjaTrader's Ratio Trigger and/or Size trigger to determine when the stop is triggered. There are many benefits to using this approach but they do come with a risk.

Benefits:

1) You can hide your order from the market place
2) You can avoid being stopped out of your position when the market dips into your STOP price for a brief second before continuing in the initial direction of your trade.
3) You can avoid entering a "fake-out breakout"
4) You can use negative limit STOP-LIMIT orders where your LIMIT price is less than your STOP price (reverse for shorts).

Risk:

1) Simulated stops are held on your local PC. This means you are exposed to a multitude of things that can go wrong. Your internet connection can go down, your PC could freeze or TWS can go down. NT does compensate for this by keeping a live STOP offset from your simulated STOP in TWS. Consider this your backup stop if all systems fail.
2) You are at the mercy of a steady and reliable data stream from IB. If the data stops flowing, the simulations stop flowing.
3) You could see slippage if you are using simulation during high volume or high trade rate periods.

Be forewarned, although using simulation during live trading can be of great benefit, understanding how and when to use it is critical. Simulation should NOT be used during the following time periods:
 

1) High volume and trade rate periods such as the first five minutes of trading.
2) In close proximity to major economic events such as a fed rate cut
3) Exceptionally slow and light volume

What you are trying to avoid is time periods where tick jumps often occur.

Please consider these additional parameters:

1) Simulation should only be used on high liquidity instruments
2) Simulation should only be used on instruments that do not exhibit constant tick jumps (don't trade with a spread) such as the YM.  

Simulation Parameters

Following are definitions of the three parameters used for the simulation of entry and stops. Ratio and Size triggers are defined separately for Entries and Exits per symbol in the symbol manager.

Ratio Trigger
The ratio trigger is unique and powerful. It represents a conditional value of buying or selling pressure.  This value is a symbol level parameter found in the "Symbol Manager" . This is useful for instruments that generally trade in a tight spread like the EMINI futures contracts. In a nutshell, this is a ratio of BID:ASK size when you are long or, ASK:BID size when you are short.

Example:

BID SIZE 1000 : ASK SIZE 2000

If you were long, the value would be 0.50, short the value would be 2. That is because the bid is 1/2 the ASK (0.50) or, the ASK is twice the BID (2).  Lets say this SIZE represented an inside market of 1000 x 1000.50. Lets say your STOP was 999.50. Have you ever been in a trade where the BID drops to 999.50, less than 20 contracts are exchanged at 999.50 (your STOP being one of them) and the market proceeds to move back in the positive direction? Ratio trigger allows you to specify a level of selling pressure before your simulated STOP is triggered. Using this same example, if we had a Ratio Trigger value of 1, NT would not trigger the STOP at 999.50 until the BID SIZE was less than or equal to the ASK SIZE. If ratio trigger was set to a value of 2, then NT would trigger the stop once the BID size was less than twice the ASK size.

Size Trigger
The size trigger is simply a measure of BID or ASK size. The value is compared to the current BID/ASK size to determine if a stop order is triggered.

Example:

SIZE TRIGGER: 200

If you were long, and the market was trading at your STOP LOSS price, NT would trigger the stop order once the BID size was LESS than 200 contracts. If you were short, the Size Trigger would be compared against the ASK size. For entry orders long, the ASK size would be compared where as short, the BID size would be compared.

SIMSTP
Offset value used when simulated stop option is turned on. NinjaTrader will use this value to send a STOP order that rests away from your true STOP. Consider this a back up STOP in the event that you have problems with your system.  IMPORTANT: USE A LIBERAL VALUE. A VALUE OF 5 PTS FOR THE ES IS REASONABLE. ANYTHING LESS PUTS YOU AT RISK OF A REVERSED POSITION WHEN YOUR ORDER IS CLOSED DUE TO THE POTENTIAL OF BOTH TARGET AND STOP ORDERS BEING FILLED.

Usage
Ratio and Size Triggers can be used independently or in combination of each other. If you wish to only use the Size Trigger, simply set the Ratio Trigger value to zero in the symbol manager. If you only wanted to use the Ratio Trigger, simply set the Size Trigger value to zero in the symbol manager. To use both, simply set values for both trigger parameters.

Simulated STOP LOSS

To turn simulated STOP LOSS on in NT, make sure the SS checkbox in the quotes and positions section is checked.

Although NT will simulate your stop, NT will still issue a stop order to the market place. This backup stop order is sent out using the "SIMSTP" offset value to determine how far from your current STOP LOSS order, the backup stop will be placed. It is also wise to have a "Bracket" or "AutoScale" exit type in force so that  a LIMIT target order will be resting in the market as well. There are several advantages to having protective orders in the market while the actual stop is being simulated.

1) Having a live STOP order can protect you in the event of a failure with IB server, TWS or NinjaTrader. Since you can specify the "Simulate Stop Offset" value, the live stop can be placed at your discretion.

2) Simulated Stop option can be turned ON/OFF at any time even during a trade. There might be a reason in which you want your simulated STOP to become a live STOP. By unchecking the SIMSTP checkbox, the live resting STOP will be modified to your simulated stop in milliseconds.

3) In practice, a simulated stop will take longer to fill than a live native stop. Having a live LIMIT order resting enables NT to simply modify this order once the simulated STOP is hit. This process is quicker than issuing a brand new order to close the position. This set up allows NT to be prepared for the simulated stop trigger and process it as quickly as possible.

Simulated Entries

To turn simulated Entry on in NT, make sure the SE checkbox in the quotes and positions section is checked.

Although NT will simulate your STOP entry order, NT will still issue a LIMIT order to the market place. This LIMIT order is used so that once your simulated STOP is triggered, NT can simply modify this LIMIT order to get you into your position quickly. If NT had to issue a new order, you would lose precious time risking your ability to get filled. The initial LIMIT order is placed at a value 3X your LIMIT Offset (see Symbol Manager) away from the current inside market. This provides a large enough buffer that you will not get filled. Once the STOP is triggered, NT will modify this LIMIT order to your LIMIT price if you are using a STOP LIMIT order or, if you are using a STOP MARKET, it will adjust your LIMIT order to 1X your LIMIT offset over your STOP price (for long, under for short) in an attempt to fill you at MARKET. Because of how simulated entries are set up, you can now use a negative limit STOP LIMIT order. Since NT will adjust your LIMIT order to your LIMIT price, you can specify a negative LIMIT value to attempt to enter your position on a retracement.