Please explain your understanding of IB stop order execution logic

Quote from ddunbar:

I think you've either misunderstood me or I wasn't clear enough.

I'm suggesting that IB's systems monitor unpublished bids but that their system is setup to assume that since a trade occured below your stop, that condition 2 is met by implication. In this case, a published bid is not necessary because the fact that a trade occured implies that there was an actionable bid, albeit an unpublished one.

I know condition 2 says "published bid." But I think the system is programmed to interpret a last trade below as meeting both conditions. This is so that you don't get caught in a situation created by low liquidity were only bid/ask is moving below your stop but last price is still above. There are times when bid/ask may not be keeping up with last price so the system gives priority to last price if it's below your sell stop because published bid/ask may not have kept pace.

That's the way I see it anyway and understood it.

And by erroneous trade, I don't mean that it actually is an erroneous trade but that it could potentially be one which if determined so would lend to your benefit.
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I don't think that it would make any sense to impose two conditions on a stop trigger, and then to assume that the first of the two conditions implies the second, so that the second need not be checked. I'm sure they are not doing this. I'm also sure that when a stop is triggered by a trade report, it doesn't matter if the reported trade was an error trade, and it would not benefit me in any way if it was an error trade. If my stop is triggered by an error trade, or because I don't know my broker's stop triggering logic, or both, then that is my problem, nobody else's.

Can anybody explain IB's "last" method for triggering stops?
 
Just to make this more interesting, the newest version of TWS contains the following enhancement:

"New Stop Trigger Methods

You can now choose from several new stop trigger methods including:

* Last - One Last Price value must be less than (for sells)/greater than (for buys), or equal to the trigger price.

* Double Last - Two consecutive Last Price values must be less than (for sells)/greater than (for buys), or equal to the trigger price.

* Bid/Ask - For a buy order, a single occurrence of the bid price must be at or above the trigger price. For a sell order, a single occurrence of the ask price must at or below the trigger price.

* Double Bid/Ask - For a buy order, two consecutive bid prices must be at or above the trigger price. For a sell order, two consecutive ask prices must at or below the trigger price.

* Last or Bid/Ask - For a buy order, a single bid price or the last price must be at or above the trigger price. For a sell order, a single ask price or the last price must be at or below the trigger price.

* Midpoint - The midpoint must be at or above (for a buy)/below (for a sell) the trigger price, and the spread between the bid and ask must be less than 0.1% of the midpoint.

To choose trigger methods, display the Trigger Method field by right-clicking in the column header area of the trading window and checking the Trigger Method selection in the list of Order fields. You can also use the Trigger Method dropdown list in the Order Ticket."

http://www.interactivebrokers.com/en/software/releaseNotes/Betanotes.php?ib_entity=llc
 
Quote from originalskunk:

Just to make this more interesting, the newest version of TWS contains the following enhancement:

"New Stop Trigger Methods

You can now choose from several new stop trigger methods including:

* Last - One Last Price value must be less than (for sells)/greater than (for buys), or equal to the trigger price.

* Double Last - Two consecutive Last Price values must be less than (for sells)/greater than (for buys), or equal to the trigger price.

* Bid/Ask - For a buy order, a single occurrence of the bid price must be at or above the trigger price. For a sell order, a single occurrence of the ask price must at or below the trigger price.

* Double Bid/Ask - For a buy order, two consecutive bid prices must be at or above the trigger price. For a sell order, two consecutive ask prices must at or below the trigger price.

* Last or Bid/Ask - For a buy order, a single bid price or the last price must be at or above the trigger price. For a sell order, a single ask price or the last price must be at or below the trigger price.

* Midpoint - The midpoint must be at or above (for a buy)/below (for a sell) the trigger price, and the spread between the bid and ask must be less than 0.1% of the midpoint.

To choose trigger methods, display the Trigger Method field by right-clicking in the column header area of the trading window and checking the Trigger Method selection in the list of Order fields. You can also use the Trigger Method dropdown list in the Order Ticket."

http://www.interactivebrokers.com/en/software/releaseNotes/Betanotes.php?ib_entity=llc
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You are describing a beta version of TWS, not a production version.

The beta version's description of the "last" method for triggering stops seems to conflict with the traditional description given in TWS documentation. The traditional method enforces a test on the bid-ask spread, whereas this new beta version does not sound like it does so, and instead sounds like it deals exclusively with the last reported trade price.

If nobody can come up with an explanation, as to the "last" price stop trigger method used by IB, then maybe I will send a PM to IBSoft and ask him to come on to this thread and to explain things.
 
Best bet, PM IBSoft and Def. It appears that no one has had the experience you've had or at least hasn't noticed this thread yet.

Nothing like hearing it from the horse's mouth, so to speak.

But I suspect that a bid did come in which was associated with the last sale which triggered your order. That bid would be on IB servers. And it might be what they mean by "published." I.e. disseminated. When I had a situation, I was told that they recieved a bid which did not show up on the time & sales log of TWS. But that was with Forex.

But we'll see.
 
Hi Jim!

As always, the best (and oftentimes the only) way to get the answer for a particular order is to open a ticket with IB's help desk. They should be able to pinpoint exact tick off which the stop has triggered, and bid/ask at the time of the trigger if the order triggered off the last price.

The exact behavior of the simulated stops is as follows:

- for the "Last" trigger method, the last price must reach or penetrate the trigger price. At the same time, the last must be within bid/ask spread or not more than 0.5% outside.

- the default method for NASDAQ stocks, including QQQQ, is double-bid/ask. With this trigger method, the stop triggers once bid (for buy-stop) or ask (for sell-stop) reaches or penetrates the trigger price, and there's a second bid/ask update that also reaches or penetrates the trigger price. The second bid or ask must be at larger size, if it is at the same price. The bid/ask must also be not crossed.

Prior to the latest TWS beta, the only way to change the default was by using API or via "Configure->Stop Trigger Method" in TWS. I presume you have set this default, since you believe your order was triggered by last.

Please also note that for US stocks IB uses aggregated best bid/ask and last to trigger stops (even if the order is directed).
 
Quote from kostia00:

Hi Jim!

As always, the best (and oftentimes the only) way to get the answer for a particular order is to open a ticket with IB's help desk.
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I appreciate the thought, but in reality, this is simply not true. I have already gone this route, of communicating with IB CS people, and I have already been given contradictory information by them, in regard to this subject. I have also observed that trouble tickets often get obviously incorrect responses from people unable to address them in any meaningful way. If what you wrote was true, then there would have been no need for me start this thread, and I could have just got my questions answered via trouble ticket. I started this thread because I need to get answers from somebody who actually knows what he is talking about, whether this be an IB customer, or an IB employee more knowledgeable than the lowest-level CS people.

I had, indeed, selected the "last" trigger method, instead of the default method. Your description of the "last" trigger method seems to conflict with IB documentation, which states the method will not trigger a buy (sell) stop unless the ask (bid) reaches the trigger price. It would be extremely helpful if you could explain whether or not you actually know for a fact that what you have said about stops is true, and that the documentation is wrong; and also, if you could explain how you know. This is necessary, because I have gotten so much conflicting information, that I cannot simply assume that any particular individual is giving the right information, unless I have some special reason to believe that this person knows. Please tell us more about how you know. And thanks for responding.
 
Kostia00 works for IB. I asked him to post in response to your PM. You can take his statements on the subject as accurate.


Quote from jimrockford:

I appreciate the thought, but in reality, this is simply not true. I have already gone this route, of communicating with IB CS people, and I have already been given contradictory information by them, in regard to this subject. I have also observed that trouble tickets often get obviously incorrect responses from people unable to address them in any meaningful way. If what you wrote was true, then there would have been no need for me start this thread, and I could have just got my questions answered via trouble ticket. I started this thread because I need to get answers from somebody who actually knows what he is talking about, whether this be an IB customer, or an IB employee more knowledgeable than the lowest-level CS people.

I had, indeed, selected the "last" trigger method, instead of the default method. Your description of the "last" trigger method seems to conflict with IB documentation, which states the method will not trigger a buy (sell) stop unless the ask (bid) reaches the trigger price. It would be extremely helpful if you could explain whether or not you actually know for a fact that what you have said about stops is true, and that the documentation is wrong; and also, if you could explain how you know. This is necessary, because I have gotten so much conflicting information, that I cannot simply assume that any particular individual is giving the right information, unless I have some special reason to believe that this person knows. Please tell us more about how you know. And thanks for responding.
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Quote from IBsoft:

Kostia00 works for IB. I asked him to post in response to your PM. You can take his statements on the subject as accurate.
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Thanks to IBsoft and Kostia00 for answering my questions. I had no idea Kostia00 works for IB. I know IBsoft knows his stuff, so if IBsoft says Kostia00's info was accurate, then I know I can rely upon it. And what is more, the actual behaviour of my stop order was consistent with what Kostia00 said. So thank you!
 
Quote from jimrockford:



I had, indeed, selected the "last" trigger method, instead of the default method. Your description of the "last" trigger method seems to conflict with IB documentation, which states the method will not trigger a buy (sell) stop unless the ask (bid) reaches the trigger price.
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Jim:

What about finding the IB documentation "error" or misleading writeup and sending it in to IB as a trouble ticket? (Along with clarification, suggested change, etc.) It might help other IB customers that are not ET members.

Jack
 
Quote from jimrockford:

I had, indeed, selected the "last" trigger method, instead of the default method. Your description of the "last" trigger method seems to conflict with IB documentation, which states the method will not trigger a buy (sell) stop unless the ask (bid) reaches the trigger price.
More...

Jim:

What about finding the IB documentation "error" or misleading writeup and sending it in to IB as a trouble ticket? (Along with clarification, suggested change, etc.) It might help other IB customers that are not ET members.

Jack
 
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