Today at 10:30:03 there was a price spike in Rough Rice (yes I know it's illiquid but this is ridiculous). It went from around 12.50 up to 12.87 (just about the limit up price) before returning to 12.50ish about 2 seconds later. Any clue how to avoid being r@ped by this type of spike? Or under what circumstances would some of these trades be busted?
Similar event happened the night before as it got sold down to 1215 momentarily before going right back to 1240. It happens, don't use stops.
You can't sit there overnight and watch this beeyotch, so what can you do without stops? I guess you could program it to wait and see if it trades to that price for more than a minute....
And what if this "spike" was a commercial sweeping the book because of some weather event that destroyed rice fields - causing a multi-day limit up move where the next trade is 1600? "LOLZ, I got out just in time, look at those suckers paying 1600" A spike is only a "spike" after the fact. And it's not the exchange's job to determine what a ridiculous price is, it's yours.
Rather than not use a stop at all, use a stop limit order with enough room to limit your risk but have a good chance of being filled if needed. Obviously it will get blown through if a big move happens so you need to monitor it quite often or have a notification setup to alert you if it trades through your price but usually you are better off with a stop limit order in than nothing at all. I got hammered one time on coffee (KC) thinking that I was safer with a stop market order working. Not so.. you will get the worst price pretty much every time. My slippage on that trade was about as much as I was risking to begin with . Of course it snapped right back up after all the stops were cleared.
What is the purpose of speculating in an illiquid market? What are you hoping to accomplish that you couldn't do in an instrument with more volume?