Hotkey Limit Ask and Limit Bid Settings

[wpicotte 16]

I'm currently using the bid / ask rules that Andrew provides, whereby buys are made at limit Ask +.10 and sells are made at Limit Bid -.10.

 

I notices today that executions on some of my orders were made at the extent of this .10 range, and I'm unclear as to why. I've also seen others in the chat mention that their limits are .05 as opposed to the .10.

 

Could someone please clarify on this. I'm confused about the implication on the setting.

[Robbie Williams 12]

Hi Wesley. I downloaded Andrews hotkey setup and I believe that the new figures for the keys are a 0.05 (5 cent) range now as opposed to 10 cents like you have.

 

In regards to why there is a 5 or 10 cent range on the bid or ask? Well because we are using limit orders, if the price of the stock goes up or down really quickly we want to make sure that we can get in or out of the action. If we just bought st the ask and sold at the bid we might not get our order filled. By adding a 5 or 10 cent range to the bid or ask however, we are allowing a margin of price to be able to enter or exit a trade.

 

Now in regards to the implications of what range to have, if you have a lower range of say 5 cents, it means that you might buy the stock at 5 cents per share higher than the current price.cso if the price of the stock was $10.00 and you bought the stock with a 5 cent range, you might get filled between $10.00 to $10.05. If you purchased 100 shares, you may lose out $5

 

The same goes for selling, when you sell you may sell up to 5 cents less than what the selling price is - so for 100 shares you've lost out potentially twice, $5. With a 10 cent stop which it seems you have, you could potentially be losing out 10 cents every time you enter and exit the trade.

 

The trade off (mind the pun) between a small or large range is being filled or not and paying more for the share or selling for less. I've seen some people on this forum that are using 3 cent ranges in their entries. I'm not an expert but I've kept mine at 5 cents and I believe Andrew uses 5 cents also.

 

Hope this explanation helps mate.

[wklodge 2]

On 1/29/2018 at 6:06 AM, wpicotte said:

I'm currently using the bid / ask rules that Andrew provides, whereby buys are made at limit Ask +.10 and sells are made at Limit Bid -.10.

 

I notices today that executions on some of my orders were made at the extent of this .10 range, and I'm unclear as to why. I've also seen others in the chat mention that their limits are .05 as opposed to the .10.

 

Could someone please clarify on this. I'm confused about the implication on the setting.

I use Ask + .05 for buys, and Bid - .05 for sells. The orders can get executed at the limits of their respective ranges due to slippage. I'm using marketable limit orders so I've seen some slippage from time to time.