Trailing Stops @ IB - Unreliable?

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LessonsLearned

Does anyone know any details of how IB triggers trailing stops? (i.e what algorithm does the system use...it is not a reflection of the classic trailing stop definition, with the stop trailing price movement in the direction of the trade.)

I had trailing stop trigger 5 minutes after I placed my buy order, .01 below my entry. The stock was virtually flat. It never moved more than 0.05 above my entry or 0.06 below. My stop was 0.22 below the entry.

IB reminded me of the disclaimer (no guarantees on execution price for trailing stops), which is fine. I'm more concerned about what caused the stop to execute.

Thanks:confused:
 
Please send another mail to the help desk with the details so they can read the audit trail. While not trying to imply you made an error, more often than not, when clients question the triggers or fill it has to do with an input error or how the trigger was set.
 
When you enter a trailing stop order you can see your current stop price - and can see it moving/trailing.

You need to add the column "Stop Price" - go to Page>>Layout.

This should help you understand when and where it triggers - if you still experience an issue send the problem to the helpdesk and they can check on it for you.
 
There used to be a serious flaw in IB's trailing-stop behavior in cases where trailing stops were attached to limit orders. The stop price was not calculated based on the market price, but on the limit price used to enter the market.

I had informed the help desk and posted at IB's forum, but last time I checked the bug was still around.

In my case, I was placing a bracket order at the open on Eurex. Anybody encountering issues with the trailing stop should check whether a) it was an attached trailing stop and b) the stop's first stop-point was maybe relative to the original limit price and not the actual market price.

Here is the mail I wrote to the help desk which might clarify my case.

*********

Trailing stop orders attached to a limit order placed before the open get falsely triggered upon opening of the market (after the parent order got filled).


I placed three limit orders before the opening at Eurex this morning (limits: 3209, 3201, 3193), all for the Dax future (September), but with different limits. I attached a trailing stop of 15 points to either order. All three parent orders got filled at the opening price of 3209 (time: 9:02:17).

1) Immediately at 9:02:19 one of the attached trailing stops was triggered; which shouldn't have happened because the market didn't move much this morning.

2) Also, subsequently the remaining two trailing stops showed differing stop prices, although these should have been the same (same underlying, same trailing amount of 15).

This was clearly an unwanted behavior of the attached trailing stops. It seemed to me their stop prices were calculated based on the limit price of the parent order or some other reference rather than on last market price.

*******

You might be seeing something similar IF the Limit you are using is somewhat away from the market, thus making this order a de-facto STP MKT order.
 
Dr. Bob,
As mentioned, in my previous post. You can set-up your layout so that you can see the current stop price. This will enable you to see how it is working.

You should also use the colour coding.

This is how it works:
You send a limit order plus an attached trailing stop.
1. Your limit order should be green -indicating that it is at the exchange.
2. Your trailing stop will be a brownish colour.
3. When the limit order is filled. The trailing stop becomes active - it will now change to a dark blue- however, it will not be set until there is a trade.
4. The stop will then become active on the next trade - and you should see the level of the stop displayed in the "Stop Price" column. (The "Aux. Price" will show the trailing amount".
5. The "stop price" will then trail - you can see it updating in real-time.
 
I had enough weird executions with IB simulated stops, that I only use the exchange's native stops now:

Globex: Stop-Limit
ACE: Stop

This also removes the small risk that there might be a disconnect between IB's servers and Globex as has happened on occasion.

One could make an argument that the three most important parts of trading are
1) Risk Control
2) Risk Control
3) Risk Control

In any case, using the exchange's native stop orders definitely reduces risk.

I have only had one stop-limit order not execute, and Globex-IB TWS-Medved Quotetracker t&s showed less than 30 contracts traded at that price (at a single moment), which explains why I didn't get a fill. I have never had an ACE stop order not execute, although I have had slippage.
 
Steve, you missed the point of my statement. I do understand how to use trailing stops, but the algorithm just uses the wrong price to trail off (at least in my view).

Just do the following in the demo version and you get my point.

Say, ES is trading at 1040.
You set up an limit buy order with a limit of 1060.
You then attach a trailing stop with stop amount of 30p.
You transmit the limit buy order, get an immediate execution at 1040.
If you now check the stop price column, what would you expect. I would expect my trailing stop to trail the current price by 30p and the stop to sit at 1010 (leaving minor movements since filling aside).
What you get is that the stop is at 1030, trailing the actual market by just 10p.

Had I just used a trailing amount of 15p, the stop order would have been immediately filled (at least in the production version).

You can replicate the exact same behavior in the production version.

I. e., where your stop sits depends on the limit price you use, not where the market trades.

Hope you see my point.

Regards


I
 
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