Interesting in hearing from experienced (years) active traders about problems they have encountered post-trade such as settlement issues, broken trades, clearing issues, really just any kinds of issues that have happened to you after the trade has been confirmed on the exchange. Have you ever lost money after a winning trade because of post trade issues, if yes, what caused it ? How could it have been avoided ?
Post Trade Issues
- Thread starter eves_banished_children
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It means you broke the embedded rules in the financial system, so your trades are not "valid". Don't break the rules, then you have no problem, it's very simple. Right, you mean what are the rules, they are stupidly complex and I am not going to explain them, so rely on everyone else's opinion that it's your methodology that is wrong, it's not, but that's simpler.
Please stay out of the thread if you're not going to post something on point and helpful.
You mean having experience of brokers doing exactly what you are asking about is not useful, fair enough, will leave it to the theorists.
Post trade issues in US equities are very rare, aside from days like the flash crash. Google the term "clearly erroneous" and the exchange rules around that and you can figure out what situations to avoid.
Bonds on the other hand are a mess and I've had lots of problems, likely due to some sort of abuse by the exchange or the market makers trying to escape unprofitable fills retroactively.
Bonds on the other hand are a mess and I've had lots of problems, likely due to some sort of abuse by the exchange or the market makers trying to escape unprofitable fills retroactively.
No, I mean I'm doing automated trading and want to know what kind of issues could cause me to lose a trade which could put my entire string of trades in jeopardy and cost me money, how I can avoid those kinds of issues, etc ... and your post is not the least bit helpful. That's what I mean.
Thanks for posting your experience, MoreLeverage. I'm curious, on those bond trades, does it usually happen pretty fast ? I've heard that they can initiate a broken trade up to 30 minutes after the trade happened, and that it can take up to another 30 minutes for it to be resolved, has that been your experience ? How do you usually get notified that this has happened ?
Be a little more respectful, you obviously don't know where the circuit breakers and limits are so I will put it in more "simplistic" terms, if there is a flash crash can they delete trades causing you a capital loss, yes, can they delete stop orders causing you a capital loss, yes, can they block you from taking out profits, yes, will algos (which you did not mention) magnify any losses if an anomaly occurs, yes, do you need manual circuit breakers in your system, yes.
The more commissions you pay the less problems you have, as everyone over trades they never see these "anomalies". If you trade very little but make large profits, these show up regularly, simply, the more efficient your methodology at making and keeping returns the more "issues" you will see. The consensus is that they do not exist, and there is a reason that is the consensus.
And to avoid that problem the methodology I use inverts that scenario, manual trade entry on algos and automated circuit breakers, you make less income daily but you are guaranteed to keep it long term. But given most traders are hideously inefficient they have to maximise their income, thereby take the risk of manual circuit breakers in their code assuming it will never happen to them. Ça va.
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For stocks, yes, it's very fast along the lines you describe. For bonds, usually within 1-2 hours although I remember one that was the next morning a day later. I think for stocks and bonds things should be "safe" after settlement 2 days later. You will hear from your broker.
The issue with automated is ...
10am long msft, 10:02am sell, 10:05 long msft, 10:10am sell, 10:12am long msft, 10:13am sell ...
If the 10am long msft trade is broken, then the above becomes ...
10am broken trade, 10:02 SHORT mfst, 10:05 cover, 10:10am SHORT msft, 10:12am cover, 10:13am SHORT msft ...
which is potentially VERY unprofitable, all because one trade was broken half hour earlier ..
Edit, well, that's one of many potential issues, that's what I'm trying to figure out is what those potential issues are in real life based on people's actual experience ...
10am long msft, 10:02am sell, 10:05 long msft, 10:10am sell, 10:12am long msft, 10:13am sell ...
If the 10am long msft trade is broken, then the above becomes ...
10am broken trade, 10:02 SHORT mfst, 10:05 cover, 10:10am SHORT msft, 10:12am cover, 10:13am SHORT msft ...
which is potentially VERY unprofitable, all because one trade was broken half hour earlier ..
Edit, well, that's one of many potential issues, that's what I'm trying to figure out is what those potential issues are in real life based on people's actual experience ...