IB and stop limit orders - do they work?

T

toad57

I am subscribed to an online advisory service that makes chat room calls for daytrade entry and exits. They've been doing pretty good- not a losing day since startup in the first week of September.

Anyway... the chat room host trades all of his room calls using Datek as their broker. 98% of his calls are shorts. Here is how he describes his short entry and exit methods using Datek stop limit orders:

Consider going short XXX trading 25.00 bid x 25.10 ask. I want to get it so I enter a short sales stop limit of 25.01 x 25.15 limit. Guess what, it goes to the top of the stack and gets filled at 25.10 as the bid is already under my activate price and my limit is above the ask of 25.10. I get all the share I want.

If the stock moves down to 24.50 bid x 24.55 ask then I cover by entering an order of 24.49 x 24.56 and get an immediate fill.
More...

Ok, I've tried to adapt this technique to IB with no luck at all- here's what I am doing (use Bid 25.00 and Ask 25.05 as example):

  1. Submit 'stop limit' order with 'stop election price' of 24.99 and 'stop limit price' of 25.10
  2. Order goes in and sits with status color of DARK BLUE (order accepted by IB but not elected)
  3. Bid drops to 24.99 or less and the status color is now GREEN (order accepted at destination and is WORKING)
  4. Status stays WORKING forever... order never fills! :mad:

I can do regular limit orders and those work fine... go in like lightning.

Can anyone explain why this does not work with IB?

Thanks!
 
>Submit 'stop limit' order with 'stop election
>price' of 24.99 and 'stop limit price' of 25.10

Your election price is *below* your limit price. You are telling the system to attempt to sell your stock for 25.10, but to only attempt it after the market price has dropped to 24.99 or below. As you can see, this just ain't gonna cut it.

If you are selling , you will need to place your 'stop limit price' *below* that of your 'stop election' price.

JB
 
Originally posted by toad57
Ok, I've tried to adapt this technique to IB with no luck at all- here's what I am doing (use Bid 25.00 and Ask 25.05 as example):

  1. Submit 'stop limit' order with 'stop election price' of 24.99 and 'stop limit price' of 25.10
  2. Order goes in and sits with status color of DARK BLUE (order accepted by IB but not elected)
  3. Bid drops to 24.99 or less and the status color is now GREEN (order accepted at destination and is WORKING)
  4. Status stays WORKING forever... order never fills! :mad:

I can do regular limit orders and those work fine... go in like lightning.

Can anyone explain why this does not work with IB?

Thanks!
More...

IB uses the ASK to trigger the stop, not the Bid for a Sell Stop, so if the Bid drops below $24.99 it won't trigger until the ASK trades twice at or below $24.99.

My workaround is to note the spread, then place the Stop at where you'd like it to trigger +/- the spread. So if the spread is .05, then place the Stop at $25.04 for a short. Then when the Ask hits $25.04, the bid should be $24.99, and it should trigger. Of course you never know what the spread will be at any point in time so you have to estimate.

I don't understand a Limit order above the price for a Sell. Why would not want unlimited upside on a sell. I believe you want to limit your downside risk on a fill. So the limit S/B as Turok mentioned, below the election price for the Stop.
 
I agree Turok, that makes sense to me... so how is this guy doing what he is doing with Datek?

It sounds like Datek is matching up buy orders at (using the Datek example I gave) anywhere from 25.00 thru 25.10 and he is getting filled at 25.10.

No wonder he likes Datek- I went with IB for low comissions but now I'm not sure if that was the best choice.

This guy regularly gets his buy orders filled at a price higher than the current bid- something I am trying to duplicate with IB but cannot seem to accomplish.
 
IB uses the ASK to trigger the stop, not the Bid for a Sell Stop, so if the Bid drops below $24.99 it won't trigger until the ASK trades twice at or below $24.99.
More...

Thanks ddifina... that is the nugget I have been looking for! The IB manual doesn't seem to mention this anywhere... grr!

Differences in brokers! What an eye opener!
 
I don't understand a Limit order above the price for a Sell. Why would not want unlimited upside on a sell.
More...

I think this is exploiting some anomoly in the Datek order matching system- all I know is that is how this guy does it and it works well for him.
 
Originally posted by toad57
I agree Turok, that makes sense to me... so how is this guy doing what he is doing with Datek?

It sounds like Datek is matching up buy orders at (using the Datek example I gave) anywhere from 25.00 thru 25.10 and he is getting filled at 25.10.

No wonder he likes Datek- I went with IB for low comissions but now I'm not sure if that was the best choice.

This guy regularly gets his buy orders filled at a price higher than the current bid- something I am trying to duplicate with IB but cannot seem to accomplish.
More...

It may be possible to get filled on the ask, but it's not guaranteed, especially in a sinking stock. I try to become the best ask manually when shorting, and it's not very often I get filled unless the stock has high volume, or isn't trending down yet.
 
I'm a new day trader, so you'll have to allow a little patience with me...

I am seeking learned, educated comment re: the entry technique by the Datek user (in my original post)

Is the Datek entry technique, verbatim as described, only applicable for a Datek user (i.e. utilizes some peculiarity in Datek)?

I am trying to figure out why I did not readily adapt the technique, as described, to IB's stop limit order.
 
Ok... maybe I'm slow, but if you had a stop limit for a SELL of stock, wouldn't you want it to trigger when a particular BID price was matched?
 
You must log in or register to reply here.
Back
Top