Trying to understand slippage: 1.6% with Interactive Brokers.

Discussion in 'Order Execution' started by mickael28, Feb 8, 2019.

  1. Robert Morse

    Robert Morse Sponsor

    Really hard to tell from last sales what the bid was. You are not entitled to last sales, only the best bid at the time your order was triggered without any trade throughs. We don't route STOP orders to a number of exchanges. We do not hold them on our servers or on our software. This is why we use EDGX which accepts STOP and STOP limit orders at the ECN server. Much faster,
     
    #11     Feb 8, 2019
    qlai and Clubber Lang like this.
  2. I think it might have been some kind of 'speed' problem as well. Do you know if 'EDGEA' is the same as EDGX?

    Or which one of this option would be the best one for STOPs? Ideally, what you mention, I'd prefer if they were went to an ECN directly...
    upload_2019-2-9_0-42-47.png
     
    #12     Feb 8, 2019
  3. JSOP

    JSOP

    When your order is a market order, there is no guarantees of any particular price for your fills. All it's guaranteed to you is a fill and that's it. Your order is subject to whatever is the market price at the time. If you put in an order of 10K and the price at the time your order was sent to the exchange was $13.41 for example but only for 5K size, and the next price level is at $13.85 for 5K size let's say, your first 5K would be filled at $13.41 and your next 5K would be filled at $13.85 with a slippage of 44 cents.

    Bottom Line: If you don't want slippage, always always use limit orders and don't use market orders. You just have to be prepared for the fact that the order would never get filled. That's all.
     
    #13     Feb 8, 2019
  4. Robert Morse

    Robert Morse Sponsor

    mickael28,
    EDGX and EDGA are not the same and have a different cost structure. I'm not sure if EDGA accepts STOP orders. I think EDGA has an inverse maker-taker fee structure. You get paid to take liquidity, but since they get less resting orders, you might get routed to another exchange and end of paying $0.003/share.

    And, if your list was for IB, you have to ask them about what STOP orders are routed to the exchange and what are held.

    upload_2019-2-8_19-45-50.png
     
    #14     Feb 8, 2019
    mickael28 likes this.
  5. That's what I'm not fully understanding at the moment. Supposing those were sell orders rather than buys, what you mentioned, if they sent 5K at $13.41 and there were loads of bids around that price, I would expect a filled price around that quote but if I got a fill at $13.15 instead, I'd like to see what could be the cause to try and minimise it in the future.
     
    Last edited: Feb 8, 2019
    #15     Feb 8, 2019
  6. qlai

    qlai

    5k order!? Split and route to different venues?
    That is great, the best way for stops imo. Unfortunately I don't think you can do that with IB. Don't trade thin and/or fast moving stocks with IB. If you must use smart route, remove dark venues. Good luck.
     
    #16     Feb 8, 2019
  7. What happened is someone else sold a lot of shares and that moved the price down. Then your stoploss got triggered, you joined the panic selling and sold your shares at LOD. All those higher bidders you saw bought their shares from other people that traded before you. There were over 15K shares traded at 9:31:25 and your order was less than 5% of that. This is a perfect example of why you shouldn't use tight stoplosses in illiquid conditions.
     
    #17     Feb 8, 2019
    murray t turtle likes this.
  8. I just checked and your stop was 3 cents below the bid when the spread was 30-40 cents. Not a good idea!
     
    #18     Feb 8, 2019
    murray t turtle likes this.
  9. Sorry, I didn't understand this part. What was not a good idea?

    And do you know what were the bid prices for those spreads you mention?
     
    #19     Feb 8, 2019
  10. right before 9:31:25 the market had been quiet for about a minute. bid was at 18.50 ask was 18.80. Your stop at 18.47 was 3 cents below a 30 cent spread, or 10% of the spread. Movements of 10% of the spread happen randomly *all the time*, so based on that alone you should actually expect that such a stop will be triggered.

    If you are setting your stoploss in such a way that it's triggered by mere liquidity fluctuations, youre pretty much asking to get rekt as your trading will be exactly opposite of what a market maker does - it's a money losing strategy.

    IMO, stoploss, if you use them at all, should be reserved for much larger movements that would indicate news in the stock.
     
    #20     Feb 8, 2019
    murray t turtle likes this.