Losing money when limit order is placed above my average price entry?

[LenovoX1E]

Hello,

Something I've noticed lately... could you let me know if this is normal?

Let's say I like to average down up to a certain point, as I like to scale into my trades.

Example:

ES drops to 4000, I buy 10 lots

ES drops to 3995, I buy 10 lots

ES drops to 3990, I buy 10 lots

ES drops to 3985, I buy 10 lots

My average dollar entry on the DOM now says something like (making this up) 3992

I set some SELL limits at 3995, 3998, 4000, 4005, etc etc etc


I've noticed that when price trades through 3995, which is 3-4 points above my "average" cost of 3992, my P&L will show a loss...

Then as price keeps moving up, and my limit SELL orders are triggered, the "average entry" on my ladder moves DOWN and then I start actually making profit on the P&L screen

Does this make any sense at all? Is that normal?

[LenovoX1E]

Another way to ask my question (in case it didnt make much sense)

If I am going LONG but averaging DOWN over many contracts, my entry on the DOM keeps moving lower as I average down more.

Is it at all possible to get out at a loss if my sell limiit orders are ABOVE this highlighted entry price on the DOM? I thought LIMIT orders meant "at this price or better" ?

I'm not using MIT orders, it clearly says LMT on the right side of the ladder.

If it were MIT orders ,I might understand that in a fast moving market, if I set them "too close" above to the entry price on the DOM it might take me out at a loss

[NinjaTrader_RyanS]

Hello,

NinjaTrader uses FIFO accounting for scaling in and out of a position, so it is expected the average price will change as you add to your position or scale out. Your limit orders filling will not be affected by your entry prices, as these orders are filled based on market activity. Sell limit orders will fill when your limit price or better is available in the market.

Please let me know if I may assist further.

[LenovoX1E]

Hi Ryan,

Thank you for your response.

Can you clarify a question I have below:

1) First In, First Out -- so if I scale into a position say at 4000, 3999, 3998, 3997, 3996... all the way down to 3985. As I average down, on the NT8 DOM it shows my entry cost average move lower and lower. Let's say after averaging down, the DOM shows my avg cost at 3990 now.

If I put a sell limit at 3990.50, which would be "2 ticks in profit" on the DOM and they get triggered, this would be at a LOSS correct?

Because of FIFO, if price gets to 3990.75 and triggers my limit sell orders at 3990.50, it would sell my contracts from 4000 first? and then move down to my contracts at 3999, 3998, etc?

2) If the above is true, then when price gets to 3990.50 and my DOM is showing +0.50 ticks of profit, the only way to realize that profit would be if I were able to sell the entire position at 3990.50?

Thanks!

[NinjaTrader_RyanS]

Hello,

With FIFO, that trade would be considered a loss as your first entry was 4000 and first exit is 3990.50. The average price would then change to the average price of the remaining contracts. Selling the entire position at 3990.50 would be a 2 tick profit average on all of your contracts.

[LenovoX1E]

This explains why the limit sell orders 2, 3, and 4 ticks in profit were giving me losses during the trading day!


Are there other ways other than FIFO for futures trading on NT8 ?

I tend to scale into a position most of the time, so it's usually averaging down... it would be amazing if I could get out as soon as in profit instead of FIFO.

[NinjaTrader_RyanS]

Hello,

There is no way to prevent NinjaTrader using FIFO when calculating your average position price. However, keep in mind your average position price on a live trade will be reported by your broker, so this will depend on how your broker calculates average position price when scaling.

[LenovoX1E]

Thanks, I will chat with my broker on this further