Do you put limits on exit orders?

P

paglos

Dear all,

I am developing an automatic trading system and I put limit on entry orders. But I don't do the same on exits as I think I need to exit as quick as possible. But I noticed my slippage is quite big on trades as much as 100 % excess of my calculated returns.
How do you handle exits? what is be best approach? I am thinking put limits then if not filled after a certain time cancel it and send a market order ?
Thanks for reading.
 
On some markets I do so a "fat finger" won't hurt me, but like in crude or Russell putting on limits on stops not a good idea as for automation I have during middle of night and lack of volume, market can whiz on by the limits while I am sleeping. So comes down to volume and reports which in some trades are liquidated right before report and re-entered on next signal there-after.

Question: when you have been filled on the 100% excess, what does the market do right after, does it retrace quickly? That is something you might be able to test to trigger counter-trend trade after conclusion of trading the loss. Just an idea.
 
paglos said:
Dear all,

I am developing an automatic trading system and I put limit on entry orders. But I don't do the same on exits as I think I need to exit as quick as possible. But I noticed my slippage is quite big on trades as much as 100 % excess of my calculated returns.
How do you handle exits? what is be best approach? I am thinking put limits then if not filled after a certain time cancel it and send a market order ?
Thanks for reading.
More...

How liquid is the product you trade during times of stress? Are you trading equities, options, futures or FX? YOu don't have to respond, but you need to look at worst case for market orders. I would use limit orders or better, using a limit though the market. That way you are protected, a little, against extremely wide markets for short periods of time.
 
paglos said:
I think I need to exit as quick as possible
.
More...

Correct.

But this limits you to the very liquid markets (like QQQ) . And even in those markets you would have to cross them to exit. But because they are very liquid your slippage even in a worst case scenario will not be big.
 
qxr1011 said:
Correct.

But this limits you to the very liquid markets (like QQQ) . And even in those markets you would have to cross them to exit. But because they are very liquid your slippage even in a worst case scenario will not be big.
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They are very liquid until they are not.
 
rmorse said:
How liquid is the product you trade during times of stress? Are you trading equities, options, futures or FX? YOu don't have to respond, but you need to look at worst case for market orders. I would use limit orders or better, using a limit though the market. That way you are protected, a little, against extremely wide markets for short periods of time.
More...

I use paper trading account of IB, I trade intraday FX including cross currencies. IB doesn't give volume information, so it is impossible to know how liquid is the product.
 
qxr1011 said:
then trader will take a hit... and swallow it...
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Perhaps, or a trader/coder can possibly attempt to design a robust enough auto algo that checks liquidity/market conditions first and then the algo automatically exits the position in a predefined manner that provides the best prices available even if that is a 10 or 100 or 1000 lot at a time. I personally would never trade an auto algo that did not have that capability. But, that is just me.
 
paglos said:
I use paper trading account of IB, I trade intraday FX including cross currencies. IB doesn't give volume information, so it is impossible to know how liquid is the product.
More...
It doesn't show L2 info? It doesn't show bid/ask? If it doesn't, I don't understand why anyone would want to trade a product like that.
 
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