If you are trading hundred lots then there should not be a problem is you are going to the exchange on the offer. But there is a reason why there is a ton of code written to attempt to spray the ask and a ton of counter code to move the ask to capture a cent or two from the market order.
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Simple trading question about slippage
- Thread starter BillySimas
- Start date
If you are trading hundred lots then there should not be a problem is you are going to the exchange on the offer. But there is a reason why there is a ton of code written to attempt to spray the ask and a ton of counter code to move the ask to capture a cent or two from the market order.
Why? Manipulation, most likely. Just accept that that's the way it is.
Always assume negative slippage. Sometimes you get none, and sometimes it goes in your favor, but never count on either of those two things happening. In all simulations and estimates, always assume slippage will be negative.
Always assume negative slippage. Sometimes you get none, and sometimes it goes in your favor, but never count on either of those two things happening. In all simulations and estimates, always assume slippage will be negative.
Quote from BillySimas:
Is it true that there's a negative expectancy with slippage? If I place a market order, the odds of the market ticking up or down in between the time I place it and the fill should be equal right? Just wondering because it always seems to me that slippage goes against me rather than in my favor most of the time. If there is a negative expectancy, why?
EDIT: Stop market orders might have a negative expectancy since it is ticking against you?
Some bucket shops use slippage infliction software , u get filled at one price ,the market is a different price.
Quote from ocean5:
it is so b/c a gazillion orders that put prior to your market.what do you expect???
You don't seem to understand the question. Rehoboth offered some good insight, check his post out. Or, if you're interested in spewing lame, cliche trading mantras to people you perceive as novices, feel free to check out any of the posts from Mav88.
Quote from BillySimas:
You don't seem to understand the question. Rehoboth offered some good insight, check his post out. Or, if you're interested in spewing lame, cliche trading mantras to people you perceive as novices, feel free to check out any of the posts from Mav88.
No,i perceive you as a very experienced,who`s wondering about the slippage at market and found an 'insight' in the word 'spray'.Keep bying at market,dude.
When you enter positions at random, favorable and unfavorable slippage is indeed evenly distributed, assuming that the broker is honest. However, you're normally entering a trade in the direction you assume that the prices are likely to go. Slippage then works against you, as your order is filled at a slightly higher price on a long trade, or a lower price on a short trade. For exiting, it's the opposite mechanism. The better your strategy trades, the worse is the damage by slippage.Quote from BillySimas:
Is it true that there's a negative expectancy with slippage? If I place a market order, the odds of the market ticking up or down in between the time I place it and the fill should be equal right? Just wondering because it always seems to me that slippage goes against me rather than in my favor most of the time. If there is a negative expectancy, why?
EDIT: Stop market orders might have a negative expectancy since it is ticking against you?
ps - I also noticed that there are several trolls on the ET forum.
A market order gets filled against a limit order resting in the book.Quote from BillySimas:
... I'm asking about the mechanics of slippage. If I place a buy market order, the ask may tick up or down in that split second. If it's the same likelihood, why does slippage have a negative expectancy?
At the time you submit your order to buy 100 shares at market, let's say the ask is 10.00 (Philippine Pesos). Let's also say there are resting limit orders to sell 1000 shares at this price.
If no other market orders arrive between the time you submit your order and the time your order is matched with the book, you'll get filled for 100 shares at 10.00.
However, assume other traders saw the same signal you did and that some of them are closer to the exchange (or just quicker) than you. If their orders sum to greater than 1000 shares, you won't get filled at 10.00, but at a worse price (i.e. at a higher level where there are still resting limit orders). This is what will happen most of the time...
If you are lucky, the market will move down before your order is matched, and then you'll get a better fill than you expected. But this will not happen often compared to the situation described above ...
Quote from BillySimas:
Is it true that there's a negative expectancy with slippage? If I place a market order, the odds of the market ticking up or down in between the time I place it and the fill should be equal right? Just wondering because it always seems to me that slippage goes against me rather than in my favor most of the time. If there is a negative expectancy, why?
EDIT: Stop market orders might have a negative expectancy since it is ticking against you?
If the market is bid 40.00, ask 40.01 and:
you buy with a market order, you pay 40.01 at the ask.
you sell with a market order, you receive 40.00 at the bid.
Net: - 0.01
Don't over think things.