Market order it is... again.

I think that I have given up on limit orders for more than the reasons mentioned in a previous post, that of missing the entry by a few pennies. Not only would that problem be solved but another more insidious problem may be rectified.

Upon setting the limit order where I want to get in the trade, and the price I set is a little low, I see that I tend to hold the order rather than cancelling it and often...often enough... that point is actually beyond the point where I should be getting into the trade. Determined to be right I leave the order in place only to have to close the position as it keeps moving the wrong way.

Market orders, on the other hand, have the advantage of being executed quickly, getting me in when I want and allowing me to make the decision based on the information at the time... not delayed into the future by an unknown amount of time. I do need to be aware that I should not use them when volatility is high though, but when there is enough depth on both the ask and bid side of the quotes to fill at the price that I want at that moment.

Now, back to the "a little low". Without the limit order in place I would not have placed a market order as the price was slightly too high for me, if it is out of my risk range...and this is the key. I set my limit within my risk range for the trade setup at the time, but the setup changes as time progresses.

With an active order in play I have a "want" to be right. With no active order I will be more apt to not place the order in the first place, re-evaluate the setup and decide once the price does move into range whether I still see a good trade idea...WITHOUT ANY PRIOR BIAS TOWARD MY OUTSTANDING ORDER.

No matter which order I use I will not chase a price but wait for a decent pullback into some level of support.

So, setting a limit and missing a price move for the sake of pennies or placing a market order that may cost a penny? I could post many charts and moves that limit orders have kept me out of and as many that they have gotten me in when I should not have been in.

I'll go for the higher cost as the price of missing the moves that I have missed outweighs that small cost. This is mostly a head game for me as I recognize my tendencies as I track my trades and ideas in my journal. I understand the benefit of a limit order but it does not suit my current trading style.

Caveat... I must use good judgement and not get caught in placing market orders just to get into a trade quickly.

Jeff.

Stop loss, VTSO and the US market.

Well, I did some playing today in the NYSE after some morning trading in the TSX.

Stop Loss Orders.

I can place the much desired stop loss order with a market execution...I have a position right now in DZZ which Deutsche Bank Gold Double Short ETN...as close to equivalent to HGD as I found easily. I have a stop loss placed so I can walk away and feel reasonably comfortable leaving it. I was not really analyzing this one for a good entry, just a decent entry to try out the stops with a 50/50 chance of being right. Limit order to get in, stop loss to hold my losses to $10. The rising 200sma is above my stop so if the price drops past that point I want out anyway.

Virtual Trailing Stop Orders (VTSO)

Seeing as the stop loss issue was a TSX restriction I figured I would also try this out as a VTSO is basically a trailing stop loss executed as a market order once triggered...and market orders are not allowed so....

VTSO works just fine. I have not had one executed yet but I am pretty much going to plan on switching over completely to NYSE issues now. I only have to deal with the dollar conversion for my trading allowance. At least I know that I can hold USD in all of my accounts.

I need to do some research to select the proper stocks and ETFs...and ETNs I guess.

The easy ones would be AEM.TO, YRI.TO and ABX.TO as they have US equivalents, AEM, AUY and ABX respectively. Major banks are all traded on both as well so financial issues are fine as well.

More on this later I am sure.

ECN fees

I have always wondered how the ECN (Electronic Communication Network) fees have been assigned as sometimes I see them and sometimes I don't. They are pretty regular when they do appear $0.0037 per share or 37 cents per lot.

I was reviewing my trades of late and realized that anytime I placed a limit order and was filled there was no fee but yet when I place a market order the fee appears. Even though this fee is not a lot it must be calculated into the cost of trading. I am currently playing with 500 share trades so the commission goes to an even $5 ($4.95 is the minimum with Questrade based on 1 cent per share with a $9.95 maximum) and the ECN for a market order is now $1.85 each way. That makes a total cost of a round trip market order trade $13.70. Still not too much of a concern as commissions where over $20 one way...and still are at many brokers.

Looking a bit deeper into the why I find that an ECN charges a fee for trades that remove liquidity from the market. Basically a market order gets executed as fast as possible at whatever price is next in line, sometimes that price is farther away than anticipated, but that is another story. This does not add to the quotes as an order to be filled at a certain price, which means that I am not adding to the liquidity, I am not placing an order to help fill the basket of orders to choose from.

My next test will be to see if I place a limit order far enough into the quotes that it will just get filled as fast as the inside prices are well under what I am willing to pay...this type of order should get executed as fast as a market order...so I expect to still see a fee, but perhaps not. This still meets my needs of not having to dink around with limit orders and missing the trade rather than having to chase the price.

Jeff.

February 3rd. Market orders return.

Well, I've had enough of trying to nail entries with limit orders.

All the benefits of using a limit order are also detriments. While I do like getting the price that I want, I also would rather be in a trade when I decide I want in.

Today was a prime example of why limit orders are killing me. I won't note the trades on the chart as it is not terribly clear but here is the intraday for HGU:

So, $12.50 limit order ($12.48 PP) at shortly after 1000h...filled then the price dropped to $12.28...I got out around $12.38, it was moving. That was the only order that filled.

I placed another minutes later to catch the bounce off of the 200sma (green) but missed it by a penny or two. 20 cent trade missed.

1035h...$12.50 again, missed, 1058...$12.50...missed. 15 cents and 15 cents again missed.

I made out well enough when I was placing market orders to get in before so I will go back to that method again.

48 cents per share had I been using market orders, and perhaps some trades on HGD too...perhaps not. At 300 shares that is a $144 gain or $104 net profit.

I decided to concentrate on HGU only and leave HGD alone for a bit...although I did place one order over there too, same result.

The end result is a loss for the day, not really much but had I gotten in on every other order...or even one or two I would have broke even or ahead at least a bit. The one trade was filled only due to the price dropping through my order. This ETF is traded enough that the spread is only usually 1 or 2 cents so using a limit is really not a great advantage.

Trying the limit orders has given me a lesson in patience though, letting the price go if the order is not filled has it's own lesson built in. It helped to train my emotions to watch a price climb...and occasionally drop, without worrying that I missed the trade as there is always another being setup later.

I know I am a month in and really nothing to show for it but I did only plan on 40 weeks. So I still have 48 weeks to go...8 week buffer should be loads I expect.

Jeff.