IB stop order failure

R

roger2

I know this topic has been done to the hilt. But past threads on this topic have been confused by assertions that IB stops had been fixed. Until today I have avoided IB stops because of uncertainty that the problem had indeed been solved.

I tried my first IB stop orders today, with small size, just to test the functionality. Of three buy stop orders I placed, two failed. I will describe the last of these orders:

Short 300 shares of EMLX, I placed a stop-limit with 'Stop election price' of $19.55 and 'Stop limit price' of $19.60. Below is an excerpt from IB user manual describing how stop orders are supposed to be activated (Note: elsewhere it is stated that 'stop-limit' and 'stop' orders activate by the same algorithm):

"Buy Simulated Stop Orders become market orders when the last traded price is greater than or equal to the stop price. Additional buy stop order protection is provided for NASDAQ stocks and US Equity Options which are only triggered after two bid prices are greater than or equal to the stop price."


Well, in my example BOTH of the conditions were met and the stop order did not activate. The bid reached $19.55 twice - no activation of the order. Two sales prints appeared at $19.55 - no
order activation.

As the price continued to slowly move up the order did eventually activate but it did not do so in time for the $19.60 limit price to still be marketable. FWIW, this activity occured at @ 13:18 when the this stock's volume and volatility were low, although that should not matter - the stops should work in any market.

Is anyone else still experiencing problems with IB stop orders???

Or am i missing something here...
 
I don't use "Stop Limit" orders, only "Stop Market" orders, but my sell stops fail about 10% of the time. I do at least 10 a day and seem to have one fail each day. The majority execute fine, but still one failure can be expensive.

I propose they monitor the problem by having an exception report print out whenever an active stop on their system fails to activate. I talk to them when it happens to me, and end up talking to people who can't give a good answer. I think they need some serious in-house beta-testing to solve the problem. It's probably a 10 minute fix for the programmer once they find it.

I think since it seems to be on the sell side, that the algorithm that checks if you're shorting or selling or determining if the stock is available to short is causing the problem in some cases? Roger2, since yours were buy stops, then I guess I'm not sure what the common denominator is? You were buying to cover a short position I assume?

I love IB and would still recommend them to anyone who wants direct access and cheap commissions, but sure would like this problem solved. :confused:
 
ddefina,

as an experienced IB stop user maybe you can answer this:

in my example above does the trade activation require two bids at $19.55 SIMULTANEOUSLY? because that would explain why it did not work as I expected - i saw two bids at $19.55 but lower bids occurred in between

i also went back to the IB user manual and discovered that ECN stop orders activate based on the bid/ask price and not based on the sales prints
 
I believe it's two bids at or greater than your election price for a Buy Stop. If it's like you say, that would be a good reason for failure.

Another complaint I have is the Bid being used instead of the Ask for buy stops, because it's hard to know the spread and thus hide your stops behind whole numbers, etc. Because of this, I place my buy stops say at $49.97 instead of $50.01 assuming the spread will be 4 cents or greater. This is kind of inefficient to have to guess all the time. When I use Brown & Co. they obviously use the Ask to trigger buy stops because I get filled consistently at or near the election price. Def was saying people got bad fills when they used this method?

Thanks for bringing this back up. I feel like I'm beating a dead horse.

Sell Simulated Stop Orders become market orders when the last traded price is less than or equal to the stop price. Additional sell stop order protection is provided for NASDAQ stocks and US Equity Options which are only triggered after two offer prices are less than or equal to the stop price.

Buy Simulated Stop Orders become market orders when the last traded price is greater than or equal to the stop price. Additional buy stop order protection is provided for NASDAQ stocks and US Equity Options which are only triggered after two bid prices are greater than or equal to the stop price.

 
ddefina - i missed your question before: yes i was buying to cover a short, but now i am not sure the stop failed, i may have misunderstood the algorithm. i agree that it is awkward to have to guess at what the spread might be...

on another issue - from the IB user manual:

"For US markets, stop orders will only be elected by prices posted during normal NYSE trading hours. (9:30 a.m. to 4 p.m. New York Time Monday to Friday). This includes options & futures. "

does this mean that IB stop orders will not activate pre/post market ? and therefore you must monitor open positions during these times?

for example, if you are long, xyz is $10 at close, you set $9.50 stop loss, next day xyz trades down pre-market and opens at $9.00 - then does your order activate on the market open and fill you at @ $9.00 instead of triggering during pre-market?


Also, anyone else having failed stops when conditions are properly met?
 
it is hard to be sure the stop failed.
regarding the market hours... no activation before 9:30.. do not expect to get the opening price though, since the market must be opened before anything happens (so can't get the opening print).

also, orders are day orders, you must make the order GTC if you want to hold it overnight (or enter it again the morning before the open).

Actually, I tried many stop orders (futures) simulated recently, just to be sure they work. I write simulated because I sent limit prices way out of the market so no execution. but election was OK. In real life though, it does happen from time to time than a stop is not executed, but in the heat of the action it is not so easy to be sure the order was set up properly and that the market triggered the stop in my experience.

therefore, it is always good to check. the good thing trading eminis, you don' t have to check many stocks, just a few contracts. so a violated stop is quickly discovered.

neo
 
I have been using them lately and they have been working properly. I dug into this problem very thoroughly and tested it hard back when it was pissing me off to no end. Here's what I learned.

In your case, the bid must print twice consecutively at 19.55 or higher. A few minutes earlier you had a few 19.55's and higher but never 2 straight bid prints at 19.55 or higher . Actual trades are irrelevant in IB's algorithm. When it did blow through, it was too fast for the system to activate your order before passing 19.60. The "best bid" prints I have are:

13:18:09 Bid 19.53
13:18:14 Bid 19.54
13:18:15 Bid 19.57
13:18:17 Bid 19.58 (200)
Your order should activate here!!!!
13:18:17 Bid 19.58 (1000)
13:18:18 Bid 19.60 (200)
13:18:18 Bid 19.64 (1000)

To me, this would be a good case for a stop market order. It scooted right by you. As ddefina mentioned, I always use market orders for stops.

I have done about 30 stop orders since they have allegedly been fixed. I have not had any problems with any of them going green very quickly once the proper conditions are met. I don't necessarily agree with their conditions either but once you get used to it and can compensate for the lag/spread, it's easier to factor in slippage.

Hope this helps.
 
thanks to everyone - now i understand the algorithm (and how to work around it!) i appreciate your sharing of experiences and the hard work that has already been invested in this topic

what bothers me most about IB stops is that it seems difficult to carry multi-day positions if the stops won't activate pre/post market

wouldn't it be great if you could, after entering a position that moves into 'the money' - set a stop, let it ride and forget it...?

but if the stops don't work in pre/post market, not only could your stop be passed, your profit point could be passed as well. it's great that stops protect you during market hours, it would be even better if they protected you all the time...
 
roger,
the problems with pre/post market are liquidity. after hours you get wide markets and often trades way out of range. In addition, there really is nothing to stop somone from trading small size just so they can trigger other peoples stops and trade against them at a profit.
 
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