Market orders safe?

tenthousandmen · Feb 27, 2012

Hello, bit of a newbie question,

I understand market orders are never recommended, but are they really still a risk when it comes to CME?

I have not run a C# based strategy absolutely by itself, so this is why I'm asking. Programming in limit orders, and canceling the limit orders in a few seconds if they are not filled might be cumbersome and problematic and require a few weeks of testing to make sure it works. I've been running a market order strategy on an exchange sim account (not computer based sim) with market orders without any problems...

so someone throwing out an ultra low ask wouldn't get filled from my order because of the huge liquidity in big volume contracts?

I apologize for the dork question... I'm new to automation!

eusdaiki · Feb 27, 2012

On your limit orders... why not use TIF=IOC... so that they fill or cancel immediately? (avoiding the risk of an order sitting in the market while you try to cancel it)

tenthousandmen · Feb 29, 2012

Quote from eusdaiki:

On your limit orders... why not use TIF=IOC... so that they fill or cancel immediately? (avoiding the risk of an order sitting in the market while you try to cancel it)

I'll try that. I'm just trying to decide programming limit orders (definitely more complex than market orders) versus using market orders. If market orders will always be filled at the next price on Globex, and NOT "any price" (typical market order), then market orders won't be a problem as far as getting my entire account taken away from someone buying 2 ES contracts for 500 points. If market orders don't have this problem, then I won't try to fix something that isn't broken, i.e. programming limit orders and writing code to cancel them if they are not filled right away.

Does anyone ever use market orders ever, even if just for some orders?

Thanks for the help, and apologizes for being a newbie on automation.

jeb9999 · Mar 1, 2012

The problem with market orders is what happens when the market goes haywire.

The ES has a thick book RTH 99.9% of the time. What happens that other 0.1% can be very expensive.

Look at the one minute chart for 02/29/2012. The one minute bar starting at 03:59 PM has a range from 1365.50 down to 1356.75. And the majority of that range happened in just the last 12 seconds - 1364.50 down to 1356.75.

At what price would your market order to buy or sell have been filled in those 12 seconds?

Either program for limit orders or get some big suprises from your market orders now and then. Those suprises will have you making faces like
:eek: :mad:

tenthousandmen · Mar 1, 2012

I didn't think about that... thanks.

:eek:

PocketChange · Mar 1, 2012

Suggest you read chapter 4 http://www.cmegroup.com/globex/files/ElectronicTradingConcepts.pdf

piezoe · Mar 1, 2012

PocketChange, the CME gives the current price band for the ES as 1200. I interpret this to be last + 1200 and last -1200 as defining the price band. But this seems absurd and would offer virtually no protection. What am I missing in my interpretation? I guess I should just call the CME.

PocketChange · Mar 1, 2012

No Bust Range for ES is +/- 6 Index points. $300 and I believe you have 8 minutes to notify. Probably should call them... I recall they are able to adjust the trade to the maximum rather than void and bust. ie. you get a crazy fill, they will adjust the fill so you take a $300 haircut onlyif you notify them inside of 8 minutes.http://www.cmegroup.com/rulebook/CME/I/5/88G.html

Quote from piezoe:

PocketChange, the CME gives the current price band for the ES as 1200. I interpret this to be last + 1200 and last -1200 as defining the price band. But this seems absurd and would offer virtually no protection. What am I missing in my interpretation? I guess I should just call the CME.

eusdaiki · Mar 1, 2012

Quote from PocketChange:

No Bust Range for ES is +/- 6 Index points. $300 and I believe you have 8 minutes to notify. Probably should call them... I recall they are able to adjust the trade to the maximum rather than void and bust. ie. you get a crazy fill, they will adjust the fill so you take a $300 haircut onlyif you notify them inside of 8 minutes.http://www.cmegroup.com/rulebook/CME/I/5/88G.html

But... on the day of the flash crash all trades in the ES stood... they didn't see anything erroneous about that... so don't hold your breath when filling erroneous even if the market goes down significantly more than 6 points...

piezoe · Mar 1, 2012

This seems a little unclear. But thank you both for comments. I thought I understood the protection band, but I am no longer sure. I need to call them.