What is a trade through and how does it affect the Quantitrader portfolios?
A trade through is when a system requires a stock to trade at least one penny past the limit entry or exit price. Just hitting a limit price is not enough.
Quantitrader uses a limit order to enter all positions. We identify a candidate, according to the rules of the algorithm, then we make the market come to us by setting a limit order to enter below the close of the day (or above the close for shorts).
At least 70% of the time, our limit orders aren’t filled because the market doesn’t do what we asked it to do. We just walk away from it and go on the next trade.
However, there are times when our limit order is the daily lows and we end up buying at daily lows. There isn’t a trader out there who would not identify this as a very good trade. Unfortunately, not everyone will get filled at those daily lows. Some QiT members will be filled. Some will get partial fills. Some will not be filled at all.
What do we do?
As a service what do we do? We originally thought we wanted to be as fair as we could to all members. Thus we implemented a rule that required everyone who got a fill at daily lows to exit the position the next morning. This would bring ll members back in sync. This seemed to be the fairest way to handle it.
Well, we’ve come to realize this is not the fairest way to handle it. These trades are typically very profitable. Meaning we “punished” those who were required to exit when filled. They were potentially leaving money on the table.
So we made a change so all portfolios will not use a Trade Through. We will consider all fills at daily lows as valid trades. If you are filled at daily lows the algorithm will manage it until its closed. However, if you are not filled, just watch it. I know it will be frustrating to “watch it” but recognize when you are filled, and others are not, they will be “watching” you make money. Believe it or not, it all works out even.
We’re the Plan in “Plan your Trade and Trade your Plan” – TraderJanie
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