[ts-gen] STP v LMT entry; was: Parent/child OCA groups

[R P Herrold]

On Fri, 21 Aug 2009, Ken Feng wrote:

> However, I am having some problems with implicit OCA groups.
   ...
> Suppose IBM is at $100, and I am expecting a breakout, but I don't
> know the direction.  So I want to to submit the following opening
> grouped order (I am starting with no positions/no orders):
>
> 1. BUY STP at $105
> 2. SELL STP at $95
>
> So, if 1. gets filled, 2. gets canceled and vice versa.

I am afraid I hit a threahold question as I read your email, 
and hoped to clear up some confusion in my mind.

By 'opening group order', I take it you mean opening of the 
position, and not a market open timing aspect.

I see this upcoming book:
 	http://www.harriman-house.com/pages/book.htm?BookCode=407029

 	Jacket text for Stop Orders

 	This book describes the one essential weapon in the armoury of
 	every trader, investor, and spread bettor – the Stop Order.

 	If you think I said Stop LOSS Order, think again. The
 	application of stop orders is as much about protecting profits
 	as it is about avoiding losses. And if you think you saw
 	‘investor’ in my list of people who can benefit from stop
 	orders, you don’t need to look again. I really did say
 	‘investor’.

 	Do you think you know everything there is to know about the
 	humble stop order? Well, it’s not so humble when you consider
 	that there are 'buy stops' and 'sell stops', 'trailing stops',
 	'guaranteed stops', and 'stops-with-limits'. And the various
 	combinations thereof.

 	Do you know how to apply stop orders effectively from entry,
 	through maintenance, to exit so as to buy low and sell high?
 	Or buy high and sell higher? Do you know how to limit your
 	downside risk by combining stop orders with effective position
 	sizing? What will you do if the market gaps and you get
 	stopped out for no good reason?

 	This book will tell you everything you need to know about Stop
 	Orders and how to make them work for you.

And I concluded that I did NOT 'know everything there is to 
know about the humble stop order'


The use case hypothetical I came up with is one we formerly 
saw often on 'Fed [FOMC] Days,' before the US Fed stopped 
(because it lost 'wiggle room') making interest ratcheting 
changes.  Volume and price movement would die off in front of 
the afternoon announcement, and then roar back when the press 
release hit, to one side or the other.  One could try a 
strategy of 'grabbing the tail of the tiger' as it ran off, 
and then letting go a bit later to close a position.

Manually, pre-shim, I would (and in the past I had) structured 
a breakout 'position entry' with a LMT, or a MIT pair of 
entries -- one to the long side above, and one to the short 
below.

Once the entry fired, without the shim, I manually selected 
and transmitted one or the other of a pre-staged 'correct' 
protective STP and target LMT to 'lock in' some gain.  Note 
that 'gappiness' and lack of resting orders meant little depth 
was present, and when a STP or LMT fired, it would of course 
NOT be expected to fill at that target price.  Over time, I 
would then 'manicure' STP/LMT pair to follow favorable price 
motion, and accept the end of the trade when it happened.

Not a trade that happened every month, but possibly gameable, 
assuming a 'steamroller' bigger fish does not run the stops, 
etc.  'picking up nickels' has that downside.  ;)


Ken, you instead propose use of a STP here.  This may be 
bacause a native order type of LMT is not present, or may be 
for some other reason.  I did some research looking for 'some 
other reason'

http://individuals.interactivebrokers.com/en/software/tws/usersguidebook/ordertypes/order_types.htm

A stop:
 	http://www.interactivebrokers.com/en/trading/orders/stop.php?ib_entity=llc

 	A Stop order is an instruction to submit a buy or sell market 
order if and when the user-specified stop trigger price is 
attained or penetrated. A Stop order is not guaranteed a 
specific execution price and may execute significantly away 
from its stop price. A Sell Stop order is always placed below 
the current market price and is typically used to limit a loss 
or protect a profit on a long stock position. A Buy Stop order 
is always placed above the current market price. It is 
typically used to limit a loss or help protect a profit on a 
short sale.

A limit:
 	http://www.interactivebrokers.com/en/trading/orders/limit.php?ib_entity=llc

 	A Limit order is an order to buy or sell at a 
specified price or better. The Limit order ensures that if the 
order fills, it will not fill at a price less favorable than 
your limit price, but it does not guarantee a fill.

===============================================

I have always planned on the 'remembered' "fact" that a LMT 
converts to a MKT when touched.  As I seem to have 
'mis-remembered', however, I have not _looked_ at me data 
streams for confirmation or denial of that behaviour

The text above, however, does not state that as to a LMT.  It 
appears that a STP _does_ 'submit a ... market order if and 
when the user-specified ... trigger price is attained'

Am I correct as to the analysis thought process you used to 
arrive at a pair of STP's for the position open?

-- Russ herold