Real trading: Market orders Vs Limit orders

[pstrusi]

Hi NT,

The goal of this post is NOT looking for help addressing an issue but to know a little bit in your expertise about real-trading; so obviously this is "not priority" .

I've been developing strategies for quite some time, and once you have an interesting Backtest, the logic next step would be a real-time simulation, where the critical "filling" orders procedure could be easily, mostly, one of the reasons why remarkable differences found between Backtest and Real-Time.

I've listened several opinions from experts, senior members and my own experience. The conclusions are still general and rather depending on many factors, such as: the market you're trading, the instrument, day's conditions, general liquidity...etc. All of us know the main features and differences between limit and market orders but the practical consequences is what really I try to manage. For example:

- I've seen Strategies working with limit orders ( check against backtest trades ) where 85% are identical but with some "Not filled" ( as expected ), it doesn't sound very bad but unfortunately this might affect the internal continuing logic of calculations and signals ( if day-trading ) besides the overall performance.

- Despite you could have some indicators to detect volatility, still is not predictable a "black swan" or "Fat-finger" that could turn markets insane in secs, so under these conditions of fast and big volatility, limit orders is going to let you down or getting you in troubles.

There are more "naked-truth practical examples" when using limit orders. Now Market orders has its darkside too. If you're trading in not very liquid instrument, market orders, with wide spreads can kill you in hours ( if day-trading of course ), besides you're an easy victim for HFT profit from you.

So, I'd like to know experiences or suggestions regarding to this critical point, I'd highly appreciate your comments.

Thanks in advance

[NinjaTrader_ChelseaB]

Hi pstrusi,

Do you have 1 tick granularity added to your script?

The likelihood of an order being filled historically becomes much more accurate when compared to real time when 1 tick granularity has been added.

Also, are you using the liberal, default, or a custom fill type?

[pstrusi]

Yes Chelsea, 1 tick of granularity is a "must"

[NinjaTrader_ChelseaB]

Hello pstrusi,

I will need to see an instance where the order did not fill at the correct price historically and compare the pricing to the market replay.

Just to confirm, the order is placed at the same time historically as it is in real-time, however, historically the limit order did not fill whereas in real-time the order has filled, is this correct?

Are you using the liberal, default, or a custom fill type when backtesting?

Can we reproduce the differences using data that is available from our Market Replay server? (A future or a forex instrument?)

[pstrusi]

Just to confirm, the order is placed at the same time historically as it is in real-time, however, historically the limit order did not fill whereas in real-time the order has filled, is this correct?

This Strategy works as day-trading style, so what it happened is easy to understand: There was a Sell signal, the Strategy submitted a Sell limit order at the current bid price, but the market went down so fast that the bid price moved down before that the order was filled, so the order remained working at that price. Eventually the market went up quickly and the order was filled, but at that time, internal calculations of the Strategy were already different, so as you can imagine the Strategy needed a little bit to sync once again market current data to internal calculations besides took some losses. That's an example of real trading life when using limit orders.

Are you using the liberal, default, or a custom fill type when backtesting?

For backtest I use the Default type cause I like to have an ideal state of filling to compare against.

Can we reproduce the differences using data that is available from our Market Replay server? (A future or a forex instrument?)

It's a forex instrument, thus pretty liquid but fast some times as well.

[NinjaTrader_ChelseaB]

Hello pstrusi,

Just to confirm, the order did not fill historically as the price was dropping, but did fill in real time?

What forex instrument are you using?

In what time zone and at what time (hh:mm:ss) was the order placed?

I would like to compare and see what the differences are with the historical tick data vs the market replay that would cause the order to fill in real time and not historically.

[pstrusi]

Hello pstrusi,

Just to confirm, the order did not fill historically as the price was dropping, but did fill in real time?

What forex instrument are you using?

In what time zone and at what time (hh:mm:ss) was the order placed?

I would like to compare and see what the differences are with the historical tick data vs the market replay that would cause the order to fill in real time and not historically.

1. Just the other way around: it's filled historically but not in the real-time because obvious fast market dynamics, the order was filed later at 2:24:40

2. $EURUSD

3. The order was as follows:
12/28/2015 2:22:29 AM|1|32|Order='06d8707cf6184d2cb98483a30aa13840/Sim101' Name='SHORT' New state=Accepted Instrument='$EURUSD' Action=Sell Limit price=1.096 This is US E.T ( utc-5:00 )


Chelsea I thank your attention but my interest is to listen your general expertise regarding real trading-life with: Limit Orders Vs Market Orders. As you can see it's not an technical issue, it's just market dynamics. The goal of this post is to know other points of view besides my own.

Thanks anyway

[10+YearTrader]

Chelsea I thank your attention but my interest is to listen your general expertise regarding real trading-life with: Limit Orders Vs Market Orders. As you can see it's not an technical issue, it's just market dynamics. The goal of this post is to know other points of view besides my own.

Thanks anyway

pstrusi,
Maybe you should consider joining up at a forum such as futures.io
There are currently over 76,000 members there currently. Many topics to talk about, including forex. This forum at NinjaTrader is mainly for issues and enhancements to the trading platform etc.
Best Wishes,
10+