Bid / Ask on ES

abishiai · May 8, 2003

I understand there are no 'market makers' on the ES, but the contracts available under Bid or Ask represent Limit orders in the system. If I submit a Market order to sell, I sell the bid price and someone out there buys at the bid.

If I want to enter the market long, I can also 'join the bid' by placing a limit order along with everybody else at this price. As I understand, These limit orders are filled in the order received by any market orders hitting the system, so practically speaking what percentage of the time will my limit order get filled before the market moves away?

I realize there are variables like volatility, liquidity. Also there is the question of when did I place my order in relation to everyone else. However, I am looking at this from the perspective of using a limit order to enter, rather than a market order. Under relatively normal conditions, what are the odds I will get filled with one contract trying to buy at the bid price?

I'd like to hear some feedback from someone who uses the 'join the bid' and 'join the offer' as a means of entering and exiting trades.

Cheer,

kp

DblArrow · May 8, 2003

I only use limit orders, (very rarely, I will chase if I think the move has potential) and I would guess that I have about an 80% fill rate. Never really measured it.

Have a better fill rate on the notes, 90%ish. If trading the bonds, it then drops off probably under the 80%ish.

If the price moves away by two ticks, I cancel, often to soon, but that is my way.

All that being said, I took 3 trades today and all were filled at my price. Maybe I might pay more attention.

Make 'em pretty, Chris

stock777 · May 8, 2003

The answer to your question is it depends on your trading style.

If you don't mind fading the current move (ie buying on the way down) you will be filled quite often on the bid (which will become the offer price 1 millisecond after the fill anyway).

Globex is strictly price / time priority. If you join the bid with 400 contracts already there, you will be filled when the 401st contract gets hit.

nasdaqmadness · May 8, 2003

IMHO I think you should work harder on making fast "entry decisions" and worry less about buying at the bid. If you are that worried about the best fill you are probably trading short term. Example: If I am scalping or just trying to get the best entry, not hesitating and pulling the trigger quick is usually a better fill even with a market order than wishing you pulled the trigger and trying to buy several seconds later with a limit. I think you will miss some of the best moves in the ES if you always try to buy the bid or sell the ask. If you are able to get in long with a limit on the bid you will probably wish you didn't. This is very important if you are trading the YM. If you are not quick with your entry you will give up 5-7 points in just a few seconds on a fast move, If you are trying to buy the bid you will be on the sidelines watching or chasing it up with your limit order. If you like the set up get in now! Watching the market depth and bid/ask ratio can give you a clue to the next up tick but this can sometimes trick you because new orders can pile on fast. During regular trading session I think it works fine to enter on market, exit on limit. Limit order only for over night session entries and exits.

Note: If you are not scalping or trading short term moves than yes..just try to join the bid ... you might get lucky. Do what works best for your style of trading. Just another opinion. Good luck in your trading abishiai

larrybf · May 9, 2003

i think you better off using market orders. ... the slippage is much less than the profit lost by missing some entries that occus by using finesse with limit orders. electronic orders do not cheat you like the specialist .

DblArrow · May 9, 2003

Quote from stock777:

If you join the bid with 400 contracts already there, you will be filled when the 401st contract gets hit.
More...

But of those 400 there, I'll guess that maybe only 50 will get filled at that price before prices move on. They get posted and pulled so fast, that reading the number of bids and offers is totally useless. Therefore I prefer MY price if I am going to get into a trade.

And as I scalp, that 1 tick can make a difference.

Make 'em pretty, Chris

abishiai · May 9, 2003

Quote from DblArrow:

But of those 400 there, I'll guess that maybe only 50 will get filled at that price before prices move on. They get posted and pulled so fast, that reading the number of bids and offers is totally useless...
More...

That brings up another point... As I watch the bid/ask contracts they are continually rising and falling. The same is true with the DOME, so I suppose those are all limit orders that people are posting and pulling? If so, amazing.

Originally I thought there were market makers who were offering all those contracts, but apparently everyone is on the same level!

Thanks,

kp

abishiai · May 9, 2003

Quote from nasdaqmadness:

IMHO I think you should work harder on making fast "entry decisions" and worry less about buying at the bid. If you are that worried about the best fill you are probably trading short term. Example: If I am scalping or just trying to get the best entry, not hesitating and pulling the trigger quick is usually a better fill even with a market order than wishing you pulled the trigger and trying to buy several seconds later with a limit. I think you will miss some of the best moves in the ES if you always try to buy the bid or sell the ask. If you are able to get in long with a limit on the bid you will probably wish you didn't. This is very important if you are trading the YM. If you are not quick with your entry you will give up 5-7 points in just a few seconds on a fast move, If you are trying to buy the bid you will be on the sidelines watching or chasing it up with your limit order. If you like the set up get in now! Watching the market depth and bid/ask ratio can give you a clue to the next up tick but this can sometimes trick you because new orders can pile on fast. During regular trading session I think it works fine to enter on market, exit on limit. Limit order only for over night session entries and exits.

Note: If you are not scalping or trading short term moves than yes..just try to join the bid ... you might get lucky. Do what works best for your style of trading. Just another opinion. Good luck in your trading abishiai
More...

Thanks for the comments. I'm trading for about 2pts , which by most definitions is scalping. I have noticed a significant number of my trades trade below the signal price before the target is reached, so I'm curious to see if using limit orders will improve the overall success of my methods.

Thanks,

kp

Banjo · May 9, 2003

Everything on globex is a limit order. If you are using market orders then your broker is holding them on their server and sending them to globex when the price is hit. This places you further back in the que than the person who entered a limit order which was sent directly to globex and is already in the que by the time your mkt ordered is triggered. Globex does not accept mkt. orders.

abishiai · May 9, 2003

Quote from Banjo:

Everything on globex is a limit order. If you are using market orders then your broker is holding them on their server and sending them to globex when the price is hit. This places you further back in the que than the person who entered a limit order which was sent directly to globex and is already in the que by the time your mkt ordered is triggered. Globex does not accept mkt. orders.
More...

So, if the market is at: Bid: 850.00 Ask 850.25, and I want to buy, I would be filled sooner if I put in a limit order to buy at 850.25 rather than just a market order? Or in other words, you're saying that when I put in a market order to buy, the broker enters a limit order to buy at the ask price?

Thanks,

kp