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Buying and selling without moving stock price - limit orders vs. algos


nkp007
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I've been using limit orders for as long as I have been investing, but as the amounts I am dealing with have gotten larger and with some of the companies I have invested in having low trading volume, I kept noticing that when I put in limit orders the order executes ~ 100 shares and the price jumps up to the next cent. I'm guessing the market sees the order sitting there and the algos take over to pump up the price knowing there's a temporary floor.

 

I started experimenting with IB's adaptive algo and it has been really useful so far. You can essentially set a limit order using adaptive algo and it will automatically break your order size down into much smaller increments and make incremental bids up to your limit price. In addition, I think it hides your order size so the market doesn't realize the full size of your bid since the algo is taking things down in 100 share increments.

 

For example, I put in a large limit order earlier this week and the stock jumped from like $8.50 to $8.67 and I executed 10% of the order before thinking this is ridiculous. I then used the adaptive algo and the order executed within a three cent spread over 15-20 minutes.

 

https://www.interactivebrokers.com/en/index.php?f=19091

 

Would love to hear how others approach this problem. I got tired of the market seeing my entire order and taking advantage of me.

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I thought about using the algo, but didn't quite understand how it worked. Your description makes it sounds pretty appealing.

 

One question I have about your previous practice: when you set your limit orders, did you iceberg them to show only a certain number of shares at a time or did you just leave it showing the whole order? I'm wondering if someone can still see your whole order even if you iceberg.

 

Thanks

 

I've been using limit orders for as long as I have been investing, but as the amounts I am dealing with have gotten larger and with some of the companies I have invested in having low trading volume, I kept noticing that when I put in limit orders the order executes ~ 100 shares and the price jumps up to the next cent. I'm guessing the market sees the order sitting there and the algos take over to pump up the price knowing there's a temporary floor.

 

I started experimenting with IB's adaptive algo and it has been really useful so far. You can essentially set a limit order using adaptive algo and it will automatically break your order size down into much smaller increments and make incremental bids up to your limit price. In addition, I think it hides your order size so the market doesn't realize the full size of your bid since the algo is taking things down in 100 share increments.

 

For example, I put in a large limit order earlier this week and the stock jumped from like $8.50 to $8.67 and I executed 10% of the order before thinking this is ridiculous. I then used the adaptive algo and the order executed within a three cent spread over 15-20 minutes.

 

https://www.interactivebrokers.com/en/index.php?f=19091

 

Would love to hear how others approach this problem. I got tired of the market seeing my entire order and taking advantage of me.

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