Hi all, I searched but had difficulty finding a post related to this. Basically I was wondering how folks felt about trading with market orders on the open and near the close. (trading larger, liquid stocks). Is the market open and closing process fair, or is it gamed? (I'm talking about placing a market order prior to market open, and selling right at or near the close.) Essentially I'm working with a system that I've designed and tested to trade w/ market orders on the open, but wondering about caveats in practice. Any comments pro and con? If you had to choose for systematic trading, would you prefer to trade at open or close, and why? thanks. Appreciated.
It depends on the volume you trade, but there is hardly any volume on open, I get bad fills even on small smart orders. I've tried directed orders btw on IB on open and either the system rejected them or I got a bad and partial fill, so I didn't investigate further. Moc is much better ime, I use them daily with smart routing.
thanks luisHK. appreciate the response re: poor quality of fills on open. I'm trading small volumes. I have one of my accounts w/ IB and am generally happy with executions, but I normally place trades when mkt is open, not pre-mkt. I've tried directing some order to IEX, but it's difficult for me to tell if it's beneficial given my small sample so - so smart routing is usually used - although I'd like to support the IEX guys.
If trading large liquid stocks (say MCD, VZ or Qcom this week,) I don't see fills problem for larger orders, but if it can wait the trading dayI still pass the bigger orders on MOC on those stocks. I'm usually not too concerned about 1 tick though, you probably ned to research it deeper if your strategy is about making a couple of cents per ticker.
Imo if trading small volume it won't make much difference execution wise on liquid stocks with minimal spread wether you place moo, market orders shortly after the open or moc, although you are supposed to save half the spread on moo and moc (but I tend to get a bad execution on moo if the stock is not liquid enough) My favourite order remains the MOC but it also has to do with not needing to monitor the market closely.
I'm on board with your sentiment. I'm not automated, but I want to approach things in fairly systematic way and let the market give me a fair price at time of execution because I don't want to watch a screen much of the day. I may just need to try a few to see how it works at open, although I'm looking at process to modify system to trade on previous day's close if I can get data and process together that works without too much trouble. I really like to put things together over the night so next morning trading is preferred, but I'm running tests to see if trading at previous day's close is a positive difference maker. It's swing trading system, not scalping a few cents. Thanks again for viewpoint on preference for market close.
I prefer to trade when I have signals, no matter when that happens. Then at least I have some control over what happens.
It hard to get a handle on the scale of these orders from your description. I would stick with the primary exchanges for these orders. If the stocks are not heavy traded, use limit orders. If you have a larger account and these are larger orders, you can find a clearing broker that will allow away trades and you can give those orders to a broker on the NYSE to handle. A typical account size to allow away orders is AUM > $1M. The floor broker can provide information along the way, before you get a fill.
Sorry - I should've put more details and been more clear. When I say I'm trading small volumes I mean that I am truly "small time", trading personal account. I currently probably would not trade more than $40K per trade with this given my size, although due to transaction costs I really can't shrink it much below that - doesn't make sense at only $10K-$15K per trade for instance - so there's a minimum needed size. It's a mean reverting system, max holding period of 6 days, and mean holding period is about 3.5 days. Expectancy is about 0.33% per trade. I mostly trade longer term so the swing trading would be new to me as I generally haven't worried so much about open vs. close pricing when trading over months/year time periods. It's interesting, but in backtesting I changed the system buy and sell parameters around and in testing buying on open, and selling on close pretty clearly had best results over most time periods. I'm still thinking of why that might be, but quite interesting nontheless. Buying on close and selling on close was next best. Worst scenario for this model is buying on close and selling on open.
My best guess, from your description, is that selling on the close did better because the market went up and you likely have a long strategy. You are getting the benefit of an extra up day in a bull market.