I run a system based on getting the open price and got completely slaughtered this morning. I put in a short "at open" order in for 3.5k shares of DRWI this morning. In premarket it was sitting at 3.56. The market opened and I get filled at 3.29 but its still trading at the 3.56, which is a massive hit. You can see the open price of 3.29 online but the line much higher. So, what happened here? I believe I would have been part of the open auction with the at open order and if so why did the next trade start back at 3.56 after the open auction was 3.29? My system looks for 750k volume the previous day since usually the high volume will carry over to the next day even on thinly traded stocks. DRWI has an average volume of 60k shares but it hit that in the first 5 min and yet still had some wide spreads. Any advice on what happened and how I can adjust my system to avoid it?
Most markets have a high/low in openings and it can be 5 minutes long in duration, so unless you use limit orders, you be slaughtered more till you learn. Traders putting in orders before yours gets filled better as well.
So maybe I dont fully understand how the open auction works? Also, how do I ensure I get the open price with a limit if I dont know what the open price will be?
Short in the pre-market at the price you see and like. If you do not know what price you want to short it at, then that is the bigger problem.
Not knowing the price I want to short at isnt a problem, I trade differently than you. I run a system that's statistically based and assumes I get the open price. I dont care what the company is or what the open price is as long as Im not impacting it. I am currently impacting it and need to figure out how to avoid that. That's the problem.
1 minute before the open you see the last and you can also see the bid and ask if you go to level II. Just place a limit order at the bid price to short. Not sure I understand the problem because you seem to be saying you want the open price but dont want to impact it. I doubt your 3500 shares will drive the price lower. You got screwed on a market order which you should never do. You put a limit order in.
I understand you run a system, I have 13 automated, but when you run back testing and base it on the opening price, you will never get it cause someone else got it and others had orders in before you at limit prices, you got filled on what was available.
Well...the thing is that I usually do get it. Its just occasionally have these instances were it moves huge against me. Are limits filled first? Optioncoach- This sounds great but usually the spreads between bid/ ask in premarket are pretty significant. So I still wouldnt know where to put the limit.