How to reduce ES slippage

B

bearmountain

As everyone knows, it is hard to fill limit orders in the ES mkt.

Is anyone aware of any studies done in this area. so subject area ES order ques, order age etc

When I get a system signal, I have been experimenting with initially placing a limit order, then if unfilled for lets say 20 seconds the system cancells it and goes in at the market.

I have had mixed results, there are times however when the limit order is filled within 20 seconds, but at other times the mkt order gets filled far away from the original limit price.

I am sure, I am not the first person to encounter this problem. What can be done to reduce slippage?

Is there any correlation to time of the day, rate of change of prices, volatility etc? Thanks.
 
if you have to take an order (based on say a system signal or something) then the best way is to put in a limit order -

for long for example:
a. limit at bid if you can risk waiting for it to get filled
b. limit at offer if you want to get in immediately

now which of these is better? depends on your systems expectation per trade. If ave. is more than a couple of points or even more than a point, you can go in at offer and afford to loose a tick.

Infact you should be able to test both of these scenarios using whatever system you are using and decide based on that.


-gariki
 
Thanks for your reply. I think I understand what you are saying about limit orders at bid/ask vs mkt orders.

What about favorable mkt conditions for filling certain order types? for longs, what mkt conditions are more condusive to getting an order filled at the bid?

for this one system, my profit target is only 1 ES pt, so a large opportunity to improve the results.
 
Quote from bearmountain:

As everyone knows, it is hard to fill limit orders in the ES mkt.
More...

I did not know that. I always use limit orders and have no problems getting filled with zero slippage.

If I am in a hurry to enter (usually a bad idea in the ES, since the ES usually gives you a second chance), I simply lift or lower my limit order one tick at a time until I`m filled at a price that I still think is acceptable.

Due to the short term nature of my trading, I don`t want to use market orders since I don`t know for sure which price I would get. I have experienced major slippage entering at the market at times, so I learned this the hard way.

Exiting, I may use a market stop. Usually, my fills are excellent here as well.

Granted, I`ve been trading only 1-5 contracts per trade, so it is probable a different situation if you are trading 50-100 lots at a time.
 
+1 for kcgoogler's suggestion to hit the bid/ask w/ a limit order. here's another suggestion if you're worried about missing a breakout that might not pull back and don't want to use the above suggestion and don't want to enter a market order (understandable): enter a limit order to buy 1 tick ABOVE the ask (reverse for sell). this way you are guaranteed to get an immediate fill (well mostly nothing's guaranteed) and you could get positive slippage relative to your order since a limit order by definition gives you the limit price or BETTER. a lot of times i'm pleasantly surprised when i look at my blotter and it shows the exec price is less than my limit order (i trade options). just throwing it out there.
 
Thank you guys for your replies.

I think hitting the bid/ask is probably the best.

stop limit unfortunatly has the same issue as limit orders, chance of it not getting filled. also I think the broker holds the stop limit on my computer until price reaches that level. so a delay.

It sounds like most of you are discreatinary traders?

For system traders it is a little different, slippage in a short term active system can make or break a system. The edge is tiny....
 
Quote from bearmountain:


When I get a system signal, I have been experimenting with initially placing a limit order, then if unfilled for lets say 20 seconds the system cancells it and goes in at the market.

I have had mixed results, there are times however when the limit order is filled within 20 seconds, but at other times the mkt order gets filled far away from the original limit price.
More...


is that an algor system?
 
Quote from emg: is that an algor system?
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Yes.

I think, maybe I should have opened this thread in strategy design or in automation forum. It is really part of system design to make sure the limit orders are getting filled.
 
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