Limit Order vs. Market Order

C

craigatelite

If I were creating an automated strategy on the Globex using the ES contract, which of the following set-ups might produce a "better" fill:

Have strategy wait until last price equals Target Price then CLOSE trade (using market order)

or

Immediately Set Closing Limit Order upon trade entry at Limit Price (Target Price)
 
What kind of targets are we talking here? If you're looking to make 5 pts, 1 tick isn't going to matter but if 3 ticks is your target on each trade then it matters a lot more.

You're also assuming target price limit will 'trade through' in order to guarantee sufficiency (ie guarantee fill).
What happens if price trade 1 lot at your target and reverses never looking back?



Quote from craigatelite:

If I were creating an automated strategy on the Globex using the ES contract, which of the following set-ups might produce a "better" fill:

Have strategy wait until last price equals Target Price then CLOSE trade (using market order)

or

Immediately Set Closing Limit Order upon trade entry at Limit Price (Target Price)
More...
 
Personally, I think limit out 1 tick lower than your target. Most likely you'll get filled as your target price is being hit. Occasionally, your limit will get filled without price trading 1 tick higher but I'd go for peace of mind rather than trying to squeeze out the last tick. Essentially, though, this would happen anyways in your first scenario (meaning you'd most likely get the same exit price).

Quote from craigatelite:

Fireplace:

Sorry...yes of course I should have mentioned that... I am looking at 1-2 points (4-8 ticks) on a profit target.
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Fireplace:

That's exactly the constructive feedback that will help me. I wasn't sure if an electronic exchange provided any additional/different considerations than a typical market maker would.

I assume what you are saying is that because the spread is naturally tight on the ES, then MKT at target and LIMIT at target - 1 is essentially the same.

Is there a resource to examine how wide the spreads may get during the course of a 24 hour day?
 
Right, exactly. Unless you are trading in 100's of lots, going mkt at the moment your target hits should net you 1 tick below target and if you limit out 1 tick below target and that price hits (+ trades through to actually hit your target price), both of those will give you the exact same exit price.

But, if you limit out AT your tgt, there is no guarantee that you will be filled. That's what I mean about peace of mind. I frequently give up a tick because too often, in the past, trying for that last tick has cost me many more ticks.

Quote from craigatelite:


I assume what you are saying is that because the spread is naturally tight on the ES, then MKT at target and LIMIT at target - 1 is essentially the same.
More...
 
There is a saying that goes "limit orders only catch bad markets (againest you) where as market orders catch the good and bad"

In a liquid contract over time it makes a huge difference between the two....
 
Basically you're saying which is better, wait until it hits your target and prints through it or wait until it prints 1 level below your target. If your target is 1 tick too much make it 1 tick lower. If you wait until 1055.50 is reached and you market out you will get printed at 1055.25; you'd be better off going in the book to 1055.25, since you may not be the absolute last man in the line.
 
So, I guess my original question is an Exchange question on preferential status of Orders. If Current BID = 1100.00 and Current ASK = 1100.25, I assume a Market Order executing when "PRICE" hits 1100.25 will give me 1100.00 print. I also assume that establishing a LIMIT order upon entry of 1100.00 will execute also. So, is there preferential treatment to the above order design? Does any of the statements below give higher probability of fill at the Globex?

1. If "Price" hits Target, then Close at Market (On a Long Trade, then Market equals current BID?)
2. Set Limit Order at Target. (Then if BID hits Target, it gets Closed)
3. Set Limit Order at Target - 1 Tick. (Then if BID hits Target - 1, it gets Closed). Obviously, this will execute before #2 above.
4. Design Limit Order to obtain "Current BID" and execute if "Current BID => Target"

My objective is to use best trade rules to ensure FILL at BEST price. In an electronic exchange, does MARKET (assuming BID) and LIMIT (at BID) always get executed the same time?
 
Quote from craigatelite:


My objective is to use best trade rules to ensure FILL at BEST price. In an electronic exchange, does MARKET (assuming BID) and LIMIT (at BID) always get executed the same time?
More...

Market order = execution certainty while limit-order = price certainty. You cant have both.

Which is filled first depends. Globex/ES has price/time-priority. Every order that crosses the spread has priority (price), be it a market-order or a marketable limit-order, after that the criteria is time of order arrival. Non-marketable limit-orders will be queued according to time of order arrival. Thats really basic stuff..
 
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