The logic of IB Nasdaq Stop Orders?

Turok and Magna:

Very good posts in regards to IB's lack of clarity on stop orders. This issue has gone on long enough. I'm a user of IB, but it's PAST time for IB to address/resolve ALL issues related to stop orders. As for myself, if I have a sell stop in place, I want my order sent to the market when the best bid reaches my stop. I would like my order executed at that bid or slightly below. Vice versa (at the ask) for a buy stop order. There's just way too much confusion emanating from IB's part on this issue.

Again, Turok and Magna thanks for your efforts in demanding clarity from IB.

BSAM
 
ddefina,

I know I could adjust for the spread on each stop and accomplish the same end, but who knows what the spread will be for sure at a given time of day?

Precisely. Either you watch (all) your positions and directly offer to buy or sell them (whether at market or with a limit order), or you aren't able to watch (all) your positions and that's the reason you would use pre-set stops. Which means, that day, or whatever day your stop is hit you will have absolutely no idea what the spreads are going to be for all your positions.

C'mon IB, let's get serial here. I'll give you the benefit of the doubt regarding that double-hit rule (the Turok's Cranks Rule), but if I put a sell-stop on a long that's undoubtedly going to be filled at the bid (or below) then why in heaven's name wouldn't the trigger be when my specified bid price is hit?

For instance, if I want to get out of a long if the price goes down to 30.00 (knowing that stops, when hit, convert to market orders and therefore get filled at the bid) then with your system would I place the stop at 30.10? 30.15? 30.25? because when the offer hits my number twice, doesn't matter if the price ever gets down to 30.00, my stop is converted to a market order. Very strange.
 
>C'mon IB, let's get serial here. I'll give you the
>benefit of the doubt regarding that double-hit
>rule (the Turok's Cranks Rule), but if I put a
>sell-stop on a long that's undoubtedly going
>to be filled at the bid (or below) then why in
>heaven's name wouldn't the trigger be when
>my specified bid price is hit?

I agree completely with your logic. After all, if we're buying we probably won't even get filled on the inside ask, but there not much of a chance in hell that we'll get filled on the inside bid.

My trigger price should be as close as possible to the "fill opportunity" price. The current behavior requires me to predict the spread.

JB
 
JB,

if we're buying we probably won't even get filled on the inside ask, but there not much of a chance in hell that we'll get filled on the inside bid.

True, the only way you'll ever get filled at the inside bid on a Nasdaq buy is with a limit order when the market comes to you. But as you know that's not what we're talking about here, we're talking about stop orders.

The current behavior requires me to predict the spread.

Again, absolutely true. And there's no need for it as all other direct-access platforms have reasoned. Using my earlier example, if I want to be protected on a long position by putting a sell-stop at 30.00 (which, again, by the nature of stops will get converted to a market order when hit, and therefore filled at the inside bid, never at the inside ask) then it should be triggered when the bid hits 30.00, not the ask. It's so obvious, it's frightening :)
 
magna et al....
i wasn't involved in the logic on nasdaq stops so i can't give a true explanation on their implementaion. I do believe they were created with consultation with other professional traders/firms.

The best I can suggest would be to put together a well thought out letter and send it to the mgmt e-mail on the web site. Until then, the important thing is that you know how they are initiated and can adjust accordingly. Also, I'd suggest stop limit orders if you are worried about sending a market order.
 
I sent a message to IB mgmt on behalf of everyone here and myself and received the following reply:

Thank you for pointing out our error, it [description of algorithm] has been fixed.

--Steve Sanders (from IB)

Apparently when they wrote the explanation of the algorithm, they mixed up bid and offer.
 
Originally posted by Sam Contari
Babak, who elected you mr. email? ...
Sam
More...

Sam, Def requested someone to email IB on the Stop problem and he did. The email pointed out a bug in the algorithm of IB's stop program. They responded and said they fixed the description of the algorithm. Apparently the Stop Algorithm is programmed correctly.
 
Originally posted by Sam Contari
Babak, who elected you mr. email? You don't speak for me. I don't like you pestering others, because if they don't respond the way you feel "entitled", you cry "waaaaah" all over this board.

Grow up, I'd like to see facts from you, not emotion if you don't here what you want.

Sam
More...

Personally Babak, thanks for taking the time to clear up this issue with Interactive Brokers. I suspect that Sam (quoted above) doesn't trade through IB and doesn't have a vested in interest in seeing this issue resolved.

It's good that you contacted a responsive support person. I too in the past had sent an e-mail querying their stop order logic, but the person who helped pretty much just said that's just the way it is.

-- Punter
 
Many thanks to all of you for raising, discussing and solving this issue.

I'm still a bit confused though, so just for clarity's sake, trying to sum up the new situation:

- In a long position, a sell stop is now triggered by the stop price hitting or passing the bid twice.
- In a short position, a buy stop is now triggered by the stop price hitting or passing the ask twice.

So the system we've worked with for so long a time, where in a long position, for a sell stop, the ask price had to be hit was actually a mistake then eh?

That's pretty weird, because it's not the first time the question why sell stops had to hit the ask has been raised, also given that it was a very odd and illogical system.
So thanks again, but please can any of you say if the way I described it now is correct?
 
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