Market order vs. Limit order for scalping

S

scalperX

Hi,

I've a question regarding the merit of market order vs. limit order for the purpose of scalping. Say if you think the market is moving, is it better to submit a limit order or would you actually hit the bid (expecting down move) or lift the offer (expecting up move)?

My own experience suggests that if i submit a market order, the market has to move 2 ticks in my favour before I could have a shot at cutting my position. Moreover, exiting a trade can be a problem too because the volume on the other side will be thick as well. On the other hand, if I submit a limit order, I would be able to cut my position after 1 tick vs. 2 ticks for market order. However, the problem is that often times it would move without me.

Any thoughts on how to overcome this execution problem? :)
 
I only scalp ES which is a thick market. I heard limit order might work better for thin market such as YM and NQ. My first choice would be using market order. Sometimes I will scale in another position with limit (I am confident with the signal) if there is slippage for my entry but not too far into my target. However I suspect that might be a bad idea over time... Remember I said fast slippage and not chasing.

If the slippage is too far into my target price, I will somewhat suspect that why the market would be so nice to give me a second entry. Could my trade be over already and I don't want to double down on a bad position?

Quote from scalperX:

Hi,

I've a question regarding the merit of market order vs. limit order for the purpose of scalping. Say if you think the market is moving, is it better to submit a limit order or would you actually hit the bid (expecting down move) or lift the offer (expecting up move)?

My own experience suggests that if i submit a market order, the market has to move 2 ticks in my favour before I could have a shot at cutting my position. Moreover, exiting a trade can be a problem too because the volume on the other side will be thick as well. On the other hand, if I submit a limit order, I would be able to cut my position after 1 tick vs. 2 ticks for market order. However, the problem is that often times it would move without me.

Any thoughts on how to overcome this execution problem? :)
More...
 
For what I consider 'scalping' I think it would not be possible/at least way harder if you dont use limit order most of the time.
My thoughts on when one could do different;
When entering any trade try to get the edge of the spread, place limit (if buy) at bid.
When exiting a winner try again to get the edge (sell at offer).
When desided to exiting a loser give up the edge (market order).
This is just what I have found works best for me.
 
Remember, the ES is still heavily dominated by black box HFT firms that move the bid/ask at will, market orders are the only sure fire way(though not the most efficient in obtaining best price obviously)

75% of my ES trades( I trade 200-300 contracts per block allocation trade for my clients) are market orders, other 25% are stop limit and market when touched. All are intraday positions typically closed out before market close, rarely hold overnight.
 
Quote from abattia:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=213126&perpage=6&highlight=market
http://www.elitetrader.com/vb/showthread.php?s=&postid=2973054&highlight=regret#post2973054
http://www.elitetrader.com/vb/showthread.php?s=&threadid=206926&highlight=market+limit
More...

Thanks for the links, mate.

Quote from cookding:

I only scalp ES which is a thick market. I heard limit order might work better for thin market such as YM and NQ. My first choice would be using market order. Sometimes I will scale in another position with limit (I am confident with the signal) if there is slippage for my entry but not too far into my target. However I suspect that might be a bad idea over time... Remember I said fast slippage and not chasing.

If the slippage is too far into my target price, I will somewhat suspect that why the market would be so nice to give me a second entry. Could my trade be over already and I don't want to double down on a bad position?
More...

Yes, i think i should experiment with using market order in the morning session and with using limit order in the afternoon session; and reverse the process the next day to see which method works better for my case.

Quote from syrre:

For what I consider 'scalping' I think it would not be possible/at least way harder if you dont use limit order most of the time.
My thoughts on when one could do different;
When entering any trade try to get the edge of the spread, place limit (if buy) at bid.
When exiting a winner try again to get the edge (sell at offer).
When desided to exiting a loser give up the edge (market order).
This is just what I have found works best for me.
More...

I had an epiphany: maybe limit order is good for a range-bound market, whilst market order may be better for a break-out trade.

Quote from southbeach4me:

Remember, the ES is still heavily dominated by black box HFT firms that move the bid/ask at will, market orders are the only sure fire way(though not the most efficient in obtaining best price obviously)

75% of my ES trades( I trade 200-300 contracts per block allocation trade for my clients) are market orders, other 25% are stop limit and market when touched. All are intraday positions typically closed out before market close, rarely hold overnight.
More...

What if I hold my position for less than a minute? My typical position lasts from 3 secs to less than a minute.
 
Quote from scalperX:
I had an epiphany: maybe limit order is good for a range-bound market, whilst market order may be better for a break-out trade.
More...
Agree, but if you trade break-outs, are you really scalping?
 
Just to make sure.... When I said thick market and thin market, I don't mean high volume and low volume. I am talking about the number of limit orders in each level in the DOM. NQ and YM have smaller number of contracts as limit orders on each level and traders will game it differently than ES which has thicker levels on the DOM.


Quote from scalperX:

Thanks for the links, mate.



Yes, i think i should experiment with using market order in the morning session and with using limit order in the afternoon session; and reverse the process the next day to see which method works better for my case.



I had an epiphany: maybe limit order is good for a range-bound market, whilst market order may be better for a break-out trade.



What if I hold my position for less than a minute? My typical position lasts from 3 secs to less than a minute.
More...
 
I use both, depending on context. If setup looks so good it must be taken no matter what, then market to not miss it.

If it looks like I'd prefer to enter with the better R:R, then limit to catch the reaction.
 
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