29% in 19 seconds?!

[fareastcoast]

Apparently, 19 seconds is how long it took Kraft to surge 29% on Wednesday, according to this article:
http://seekingalpha.com/article/906591-how-and-why-kraft-surged-29-in-19-seconds?source=yahoo

At the end of the article, there's a pretty well motivated recommendation to never use market orders. In this HFT dominated market, is there ever a reason to use market orders?

 

[Occam]

The article looks somewhat speculative (how does he know why a given person/HFT is buying or selling?), and this sentence seems to indicate a lack of knowledge of the US equities markets (which is what he's writing about):

<quote>citing the "clearly erroneous" trade rule introduced after the flash crash of 2010</quote>

The "clearly erroneous" rules have been around for ages; in fact, their application was <b>narrowed</b> (officially, "harmonized") in the aftermath of the 2010 "flash crash", as the prior arbitrariness of the trade bust process cost a lot of people a lot of money (perhaps this is what he's referring to, and it's just not very well-worded?).

That said, the warning against using market orders is well-founded. In fact, some (if not all?) of the early ECN's didn't allow market orders, as the ECNs' structures made them inherently dangerous. Now, having bought up these original ECN's, most of the major markets are based on the very same logic, if not the very same source code.

Market stop orders are even worse, something like probabilistic financial suicide. But lots of "traders" seem to want them, so the exchanges offer them. Which leads me to agree with another of the author's conclusions: that very short-term trading really is not an area for casual dabbling.

 

[fareastcoast]

Yea, the more I think about it, the less I can justify ever using a market order. No good can come of it. Usually, people use market orders if they are in a rush and really want to get into a position. But that usually only happens if the stock is moving quickly, and in those situations, the computers will beat you to it.

 

[wilburbear]

Quote from fareastcoast:

Apparently, 19 seconds is how long it took Kraft to surge 29% on Wednesday, according to this article:
http://seekingalpha.com/article/906591-how-and-why-kraft-surged-29-in-19-seconds?source=yahoo

At the end of the article, there's a pretty well motivated recommendation to never use market orders. In this HFT dominated market, is there ever a reason to use market orders?

High Frequency Traders should always use market orders.

You get your orders executed first. And if there's a huge price move, the SEC will cancel your filled order for you, at the bad price, because of overly volatile market conditions.

Heads I win. Tales I don't lose.

 

[Occam]

Quote from wilburbear:

High Frequency Traders should always use market orders.

You get your orders executed first. And if there's a huge price move, the SEC will cancel your filled order for you, at the bad price, because of overly volatile market conditions.

Heads I win. Tales I don't lose.

Your post, while amusing and understandably playing up to the biases of the many failed/embittered traders who frequent ET, is completely false. Just ask Knight Capital (although they did try!).

http://online.wsj.com/article/SB10000872396390444246904577571113923528168.html

 

[Spectre2007]

i only use market orders.. its system edge based.

 

[sledgeyum]

Me too. Never had any sort of bad fill.

SPXU, upro, es, aa, abk, etc.

Quote from Spectre2007:

i only use market orders.. its system edge based.

 

[peilthetraveler]

I've only used market orders a few times because its always something screwy with market orders when I use them. It once took over 20 minutes for a market order to fill for me. Called the broker and asked what was up and of course it filled as soon as he checked it.

 

[oilfxpro]

Quote from fareastcoast:

Apparently, 19 seconds is how long it took Kraft to surge 29% on Wednesday, according to this article:
http://seekingalpha.com/article/906591-how-and-why-kraft-surged-29-in-19-seconds?source=yahoo

At the end of the article, there's a pretty well motivated recommendation to never use market orders. In this HFT dominated market, is there ever a reason to use market orders?

Where is the recommendation not to invest you pension in the stock market? The insiders creamed off with insider hft bids in advance , and robbed their paymasters the pension funds.

 

[fareastcoast]

Quote from wilburbear:

High Frequency Traders should always use market orders.

You get your orders executed first. And if there's a huge price move, the SEC will cancel your filled order for you, at the bad price, because of overly volatile market conditions.

Heads I win. Tales I don't lose.

I think this is only true if you are the fastest HFT algo. The slow ones that go in at market lose badly. These guys got lucky on KRFT, most of the time, the move isn't 29%, but like 3-4%, and those don't get cancelled....but you're still out 4%