Question: Just because TraderJane says we need to know this stuff doesn’t mean we have to actually know it, does it? Answer: Yes!
I know I get on the “bully pulpit” sometimes. I know you would rather be doing other other things like giving the dog a bath, replacing the washers in your kitchen faucet or getting a root canal. But let’s grit our teeth and say to ourselves, “I will be a better person when I finish this article.”
Why you need to know this
Here at QiT we use several order types and if you don’t know about them you can’t take full advantage of all the cool ways we enter and exit trades. Cool translating into the most profitable way.
Get ready, you’re about to enter into a paid political announcement. Ok its not political and its not paid but I have your attention don’t I? And since you asked – you did ask didn’t you? I would like to say how QiT handles entries and exits is one of the many ways, we outshine, out muster and outdo other services.
Market – A Market order is an order to buy or sell at the market bid or offer price. A market order may increase the likelihood of a fill and the speed of execution, but unlike the Limit order a Market order provides no price protection and may fill at a price far lower/higher than the currently displayed bid/ask. This is your Plain Jane vanilla order. (Please do not address emails to Plain Jane. Of, if you do, at least add a Ms. to it)
OPG – use OPG to send a market-on-open (MOO) or limit-on-open (LOO) order. If you mark your order as a DAY order, many brokers will hold these orders until the markets open before routing them to the exchange. Even in this age of split-second transfers, it can still take a few minutes for an exchange to receive and queue your order. Therefore, your order gets filled a few minutes after the open. If you use the OPG time in force you will participate in
Market on Open – A Market-on-Open (MOO) order is a market order that is automatically submitted at the market’s open and fills at the market price. A MOO order combines a market order with the OPG time in force to create an order that is automatically submitted at the market’s open and fills at the market price.
Open Cross – The Open Cross is a process that generates a single opening price reflective of the true supply and demand of a particular stock as the market opens each day. The Open Cross improves upon the current market open and resolves natural stock buy and sell imbalances at the open.
From 9:28 a.m. to 9:30 a.m. (the two minutes prior to the Open), the exchanges gather and publish information about buy or sell interest in a particular stock, including an indicative opening price.
MOO orders participate in the Open Cross.
Limit orders are one of the key components in QiT’s trading. We always enter with a limit order because we never want to buy or short a stock badly enough to chase it like a spurned lover chases the object of his desire.
A limit order is an order to buy a security at no more than a specific price, or to sell a security at no less than a specific price (called “or better” for either direction). This gives a trader control over the price at which the trade is executed although, the order may never be executed, in other words, may not be filled.
A buy limit order can only be executed at the limit price or lower. For example, if a trader places a limit order to buy 100 shares at $16.23, he/she can be filled at $16.23 or any price lower. If the stock reaches $16.24, the trader will not get a fill. If it reaches $16.23 but not any lower, there is around a 50/50 chance the order will be filled depending on volume.
A sell limit order is the reverse of a buy limit order; it can only be executed at the limit price or higher.
There are other constraints a trader can use like fill or kill (FOK) and all or none (AON) but QiT does not use them and is up to each individual member to use them or not.
By using limit orders, QiT ensures a satisfactory entry. And, if none or only some of our orders execute – as often times happens – stocks run too hard and too fast, blowing past our limit price – then it’s probably for the best because experience has taught us not to chase stocks like experience has taught us not to chase former lovers.
One-Cancels All (OCA) order comprises of a group of orders linked by a customer-created title entered in the OCA field for each order. By default, once an order in the group fills, all other linked orders are canceled. If an order is partially filled, the remaining orders will be reduced proportionately to the remaining quantity of the unfilled order.
If an order is canceled by the customer before execution, all remaining orders in the OCA group will automatically be canceled, but if one of the orders is rejected or canceled by the system, the remaining order(s) WILL NOT automatically be canceled.
Market On Close – A Market-on-Close (MOC) order is a market order that is submitted to execute as close to the closing price as possible.
NYSE rules for entering/ canceling/ modifying MOC; All MOC orders must be received at NYSE (and at AMEX) by 15:45 ET, unless entered to offset a published imbalance.
New York Stock Exchange (NYSE) rules also prohibit the cancellation or reduction in size of any MOC order after 15:45 ET.
I wonder if this has ever happened to you? You get a signal to exit a long position with a limit order. As you know all limit orders to exit need to be placed with an OCA linking the limit to a MOC in case the limit price is not reached during the trading day. The limit gets hit at the end of the day so you think you are flat. But out of the corner of your eye you catch a glimpse of the ticker still in your account. What the heck is going on, you closed that position.
On closer inspection, you see the long position has magically morphed into a short position instead. I’m sure you thought your brain had gone on vacation and that you placed an order to sell twice instead of using a limit. After you quit banging your poor head against the wall, and quit kicking anything within reach of your foot (see Spot run) you start to think clearly and you realize you did everything right but you just didn’t know about the rules swirling around the MOC order.
What happened was at the end of day the OCA was not able to cancel the MOC order so, in essence, you had two orders to sell, your original and the MOC.
Isn’t trading fun?
We’re the Plan in “Plan your Trade and Trade your Plan” – TraderJanie
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