Long Term Systems and Order Placment

Discussion in 'Order Execution' started by TradingLogic, Apr 16, 2015.

  1. If I trade a system which is based on the close price (e.g...moving average crossover ) What are the techniques for placing an order the next day. Specifically a limit order.

    It seems difficult to determine a limit price the next day to reduce slippage. Do you wait until open and see where prices settle in at, or maybe limit yourself to no more than .5% higher than the previous day's close?

    Thoughts?
     
  2. bln

    bln

    Enter the same day as the signal will be trigged, otherwise one may suffer slippage as the market gap away from your teoretical entry price. I trade a EOD system myself and I know during the 5 last minutes of the regular market session if there will be a signal or not. Then I manually transmit the order exactly 2 seconds prior to the closing to get a entry price fairly close to the real closing price.
     
  3. Murray Ruggiero

    Murray Ruggiero Sponsor

    What markets, Futures,Stock and ETF's. My answer depends on that. Also are we using real time data.
     
  4. stocks ETFs EOD data. Long term trend following.
     
  5. Firstly if you're trading daily, it should be a reasonable assumption that you're signal isn't too quick. So if you backtested getting your fill at the next days close, how much does it degrade your Sharpe Ratio? If by more than 20% then you're probably using signals too quick for daily prices, closing or otherwise. A moving average crossover of at least 3,12 should be fine.

    Okay so lets assume daily prices are fine.

    Close prices can also be "odd". Ideally you can trade once a day and not use EOD data (this is pretty close to what I do). So for example you'd come into the market once a day, get your price, calculate your trade, and then go into the market. I'd then issue a limit order on the correct side of the spread, and if that doesn't work out cross the spread (heres what I do in practice). If you don't want to manage the trade then issue a market order or a limit order which crosses the spread immediately.

    If you have to use closing prices then the key decision is how you should react to movements between the close and where prices are on the open or might be when you get filled. If you're using moving average crossover, I guess you're trend following. Suppose your signal is positive. So if the price has moved up you'll still want to buy, probably even more. If the price has moved down would you still want to buy? If you updated your system with the new price would it still want to buy? It's possible, though hard work, to do calculations of the kind of 'here is the range in which I'd still want to buy' and then issue orders that reflect that.

    Alternatively taking the view that you've simulated your system with a 24 hour delay and it still worked, you could take the view that your forecast is still for a trend based on the close, and you're just getting lucky with your fill on a slight pull back on a multi day trend. So again issuing an order based on the current price is probably fine.

    On the other hand if you're trading mean reversion, or if you have got some concept of 'value in the trade' (i.e. due to pre determined exit prices) then you'd probably be happy if the price has dipped, and have some upper limit on what you'd be prepared to buy if the price has fallen.
     
  6. %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
    trend logic
    SAY ITS AN UPTREND-bull market BECAUSE IT less CRITICAL; THAN IN TIMING A BEAR DOWNTREND. In an uptrend I like to get in [end of day last 30 minutes], even if its the last 7=/ minutes some are getting out so grat fills. Long or medium term, entry is NOT that critical, limit order. Most of my markets are liquid enough to market order

    Don't missssssssssssssssssssssssssssssssssssssss a move because of nitpicking entry -medium term, long term entry is NOT near as important as trend. OF course if something has gone UP 7 days in a row I may wait a few days for entry ,LOL.Amen; thanks for question