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Market Impact of limit and stop orders untill executed.
Jul 15, 2020 at 13:15
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10 Replies
Miembro desde Apr 13, 2018
posts 40
Jul 15, 2020 at 13:15
Suppose I am in a buy trade of lot 0.1 entered at 3, currently at 4 and my target is at 5.
If I put huge sell limit order of around 10 lots at 5 or 6 or around 5 will it have an impact of driving the market up.
Or for that logic If I put huge buy stop order of around 10 lots at 5 or 6 or around 5 will it have an impact of driving the market up.
Or atleast even a slight impact.
I think so because the market is designed to fulfill maximum orders in possibility range. Like SL if not low enough, will be instantly hit. Same goes for TP.
This was just a wildcard guess. Pls help experienced traders.
If I put huge sell limit order of around 10 lots at 5 or 6 or around 5 will it have an impact of driving the market up.
Or for that logic If I put huge buy stop order of around 10 lots at 5 or 6 or around 5 will it have an impact of driving the market up.
Or atleast even a slight impact.
I think so because the market is designed to fulfill maximum orders in possibility range. Like SL if not low enough, will be instantly hit. Same goes for TP.
This was just a wildcard guess. Pls help experienced traders.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Aug 20, 2009
posts 256
Jul 15, 2020 at 17:55
(editado Jul 15, 2020 at 17:56)
Unfortunately not. Great question though.
Price only changes when a transaction occurs. So an offer means nothing unless it is accepted. You may have a car that you value highly but you won't know the true value until someone hands you cash for it and the value then becomes that price that you exchanged at, not what you had in your mind, or advertised.
Now clusters of orders(stop or limit) will affect behaviour of price action when triggered. Stop orders(normal stop orders & stoplosses) will trigger a run of pricing as they are often clustered together(fibonacci, last bar high.low, etc). That is why you should think of stop orders as breakout orders. Often this price behaviour is thought to be stop-hunting but it is actually normal market behaviour.
Limit orders on the other hand tend to create resistance when they are clustered together. They are often clustered together for similar reasons to the stop-orders.
But to emphasize, until they are triggered they cannot affect the price.
Price only changes when a transaction occurs. So an offer means nothing unless it is accepted. You may have a car that you value highly but you won't know the true value until someone hands you cash for it and the value then becomes that price that you exchanged at, not what you had in your mind, or advertised.
Now clusters of orders(stop or limit) will affect behaviour of price action when triggered. Stop orders(normal stop orders & stoplosses) will trigger a run of pricing as they are often clustered together(fibonacci, last bar high.low, etc). That is why you should think of stop orders as breakout orders. Often this price behaviour is thought to be stop-hunting but it is actually normal market behaviour.
Limit orders on the other hand tend to create resistance when they are clustered together. They are often clustered together for similar reasons to the stop-orders.
But to emphasize, until they are triggered they cannot affect the price.
Wealth Creation Through Technology
Miembro desde Apr 13, 2018
posts 40
Aug 18, 2020 at 04:38
This research paper is titled as "Market Impact of a Limit Order" by Nikolaus Hautsch*
Ruihong Huang* proves it all and is worth reading.
Ruihong Huang* proves it all and is worth reading.
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Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Aug 20, 2009
posts 256
Aug 18, 2020 at 05:52
Ok, I stand corrected.
I do have some reservations though.......that study is over 10 years old, so I'm not sure how things would have changed with today's technology. Also I have reservations about applicability to the FX market, given the size and decentralised nature, relative to the market that they studied.
I do have some reservations though.......that study is over 10 years old, so I'm not sure how things would have changed with today's technology. Also I have reservations about applicability to the FX market, given the size and decentralised nature, relative to the market that they studied.
Wealth Creation Through Technology
Miembro desde Apr 13, 2018
posts 40
Aug 19, 2020 at 20:04
:D
No u don't stand corrected. Ofc limit orders won't make a market move. But just as theoretically when u jump earth moves with u, similarly there will be an unnoticed, theoretical Impact of Limit orders which is so small that none of us traders or even big banks need to worry about it.
BTW,Facts don't get old, Elliot wave has been with us since 1930, Fibonacci from 1200AD, so is this research even if it is 10 years old. With today's technology this research was possible to be made which had been hidden from our eyes for so long. Lastly "about applicability to the FX market, given the size and decentralized nature, relative to the market that they studied", this fact is irrelevant to the type of market or its size, this effect may get magnified or diminished depending on a lot more factors than comprehend-able from a comment. Even when magnified it may still not be noticeable until a very small local market with global product demand is being studied.
So, u might wanna go through this paper before de crediting an honorable research.
No u don't stand corrected. Ofc limit orders won't make a market move. But just as theoretically when u jump earth moves with u, similarly there will be an unnoticed, theoretical Impact of Limit orders which is so small that none of us traders or even big banks need to worry about it.
BTW,Facts don't get old, Elliot wave has been with us since 1930, Fibonacci from 1200AD, so is this research even if it is 10 years old. With today's technology this research was possible to be made which had been hidden from our eyes for so long. Lastly "about applicability to the FX market, given the size and decentralized nature, relative to the market that they studied", this fact is irrelevant to the type of market or its size, this effect may get magnified or diminished depending on a lot more factors than comprehend-able from a comment. Even when magnified it may still not be noticeable until a very small local market with global product demand is being studied.
So, u might wanna go through this paper before de crediting an honorable research.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Apr 13, 2018
posts 40
Oct 30, 2020 at 10:52
@rosellemunsays You are contradicting your statement, So be cl,ar with a fact. Question is if the order will have value or not, little value, very little value or great value is out of question for now. You say "price will change only if a transaction occurs" and then you contradict it with "Limit orders often create a resistance. "
Limit order in not a transaction taken place. It is still pending order.
ANd most imptotantly, you are wrong at "price will change only if a transaction occurs", it changes with changes in supply and demand, these supply and demand is represented by pending orders.
Ever seen CFTC data /? they dont even consider trades done by us or even our brokers. Reason being that we can never match the volume of transaction done by banks and speculators. We can not even place a pending order large enough to be of their interest. ANd these firms dont place market order. Their's are always pending orders, so yes pending orders do affect the maket.
Try rading the research paper mentioned above to be clear on this topic. 'Market Impact of a Limit Order' by Nikolaus Hautsch*
Ruihong Huang*. We cant be a trader, and will always remain a gambler if we dont try to see how the market is working.
Limit order in not a transaction taken place. It is still pending order.
ANd most imptotantly, you are wrong at "price will change only if a transaction occurs", it changes with changes in supply and demand, these supply and demand is represented by pending orders.
Ever seen CFTC data /? they dont even consider trades done by us or even our brokers. Reason being that we can never match the volume of transaction done by banks and speculators. We can not even place a pending order large enough to be of their interest. ANd these firms dont place market order. Their's are always pending orders, so yes pending orders do affect the maket.
Try rading the research paper mentioned above to be clear on this topic. 'Market Impact of a Limit Order' by Nikolaus Hautsch*
Ruihong Huang*. We cant be a trader, and will always remain a gambler if we dont try to see how the market is working.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Apr 13, 2018
posts 40
Nov 07, 2020 at 14:19
@marnuslabushane @Adamgylicrist .....
Transaction is not an interesting factor for price change. It's a basic fact that as a transaction occurs, demand & supply will decrease by an equal quantity and so their ratio will change that'll change price.
Interesting point to ponder is that price will change even without transactions taking place. It's just a matter of either side giving up first or various other reasons. For e.g there has been no transactions for gold taking place since a month or two and today we discover the largest mine of ready to supply gold in Africa, the price of gold will take a great fall even if no transactions occur and just on the basis of news alone.
So there is a difference between transactions taking place and changes in supply and demand taking place.
Transaction is not an interesting factor for price change. It's a basic fact that as a transaction occurs, demand & supply will decrease by an equal quantity and so their ratio will change that'll change price.
Interesting point to ponder is that price will change even without transactions taking place. It's just a matter of either side giving up first or various other reasons. For e.g there has been no transactions for gold taking place since a month or two and today we discover the largest mine of ready to supply gold in Africa, the price of gold will take a great fall even if no transactions occur and just on the basis of news alone.
So there is a difference between transactions taking place and changes in supply and demand taking place.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Apr 13, 2018
posts 40
Dec 01, 2020 at 13:13
ofc....that is the basics. Don't know how can a trader have such confusions.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
Miembro desde Apr 13, 2018
posts 40
Feb 16, 2021 at 19:36
Alonzo_ posted:
The market only reacts to open trades. Therefore, in the same way it would be possible for almost every trader to have his own influence on the market.
@Alonzo_
Market reacts to pending orders and closing of trades too. Its out of question if your trade size needs to comparable to bigger firms to make this phenomenon evident to naked eyes.
Mind going through the clarifications given above to clearly understand this.
Indicators are so deceiving, always lagging. Trend lines & Calendars are the best.
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