This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded Research In Motion Limited (USA) (NASDAQ: RIMM) today and got jacked by my stop order. There are a few things that I learned from this experience that I want to pass on to help others avoid getting burned by this in the future.
A bit of background: I’m working out an alternate trading arrangement with my Zecco account money, so today I traded through my TD Ameritrade account. TD offers “streaming” data, and this data and my stop order are the subject of my wrath today.
The Setup
I wanted to scalp RIMM as it broke yesterday’s swing low. It broke through quickly, without giving me a good entry spot. Price rebounded, and then went down again, so I now had an area for my stop:
The Trigger
Went short as price made a new low, filled at $208.52, and I placed my stop at $209.10, safely(?) above the prior swing high at $209.04.
Trade Management
Price retraced after my entry, and I was watching the Time and Sales, but price never hit my stop. Then it moved in my favor and went down big, about 2R:
I noticed my P&L indicator wasn’t changing, and then realized that they had sent through my stop order, and I was filled back at $209.0894 for a 1R loss. Here’s a closeup of the price chart (supplied by TD Ameritrade streaming data:)
The Screwing
I tried to figure out WTF was going on. They said I was filled at 09:48:52 ET. I looked back over the TD Ameritrade Time and Sales, and found the place in question:
Only two transactions show during that second, and the highest ask at the time was $209.09, while the best print was $209.05, as my chart showed. I called TD and related what had happened. Their trade resolution department told me that there were “pages and pages” of trades that went through during that second alone. They sent me an excerpt from their records, as follows (only the names have been changed to protect the innocent and shame the guilty):
Mr. Prospectus,
Enclosed is a part of time and sales for this second.
Symbol RIMM-US Display Date
Start Time 09:49AM End Time Buyer Op Seller
Size Price Price2 News
Use Page Up, Page Down, +, -
——————————————————————————–
Ex Size Price Best Bid Best Ask Size Condition
7/11 9:48:52A O 208.9800 209.1000 1×1
7/11 9:48:52A O 208.9000 209.1000 3×1
7/11 9:48:52A O 209.0300 209.1000 1×1
7/11 9:48:52A P 209.0300 O 209.1000 2×1 BBO
7/11 9:48:52A O 208.9700 209.1000 1×1
7/11 9:48:52A P 209.0300 C 209.1100 2×2 BBO
7/11 9:48:52A O 208.9000 209.1500 1×11
7/11 9:48:52A O 209.0400 209.1500 1×11
7/11 9:48:52A O 209.0400 C 209.1100 1×2 BBO
7/11 9:48:52A O 209.0400 209.1400 1×2
7/11 9:48:52A P 209.0300 209.1800 2×8
7/11 9:48:52A O 209.0400 O 209.1100 1×2 BBO
7/11 9:48:52A C 209.0200 209.1100 1×2
7/11 9:48:52A O 209.0400 C 209.1100 1×4 BBO
7/11 9:48:52A C 209.0200 209.1100 1×4
7/11 9:48:52A O 209.0400 C 209.0700 1×2 BBO
7/11 9:48:52A C 209.0200 209.0700 1×2
7/11 9:48:52A O 209.0400 C 209.0800 1×1 BBO
7/11 9:48:52A C 209.0200 209.0800 1×1
7/11 9:48:52A O 209.0400 C 209.0900 1×2 BBOThank you,
I. Stoleurmoney
APEX Trade Resolution
Division of TD AMERITRADE, Inc.
So based on this information alone, I was indeed stopped out, as the national BBO (best bid / offer) did tick to $209.11. Once that happened, my order was sent to the market as a market order, and was filled. If this is all true, then they filled my order as requested, though it still never showed that on the tape or the charts! There is no public record that my buy-to-close order ever took place. That’s what’s got me so steamed. If the chart moved, and I got stopped out on the top tick, then so be it. It happens. But I got taken out “off the record”, or at least the record they publish in the public arena is incomplete.
The Lessons Learned
The first big lesson is that your time and sales, even if it is streaming, does NOT contain all of the transactions that occur out in the marketplace! You don’t have anywhere near all of the data, nor do you have any idea where the BBO really is now or where it has been. Your chart is also incomplete. There is a quoted market, but there are a lot of transactions that take place outside or inside of what prints on a chart or on the tape. So when you see a big block go through on your T&S? Could have been 1000 small orders all taking place within a second, just like this print was for me today. I also have no way of knowing if TD themselves bumped up the offer momentarily, using it as an excuse to “sell” me the shares, and then buying them back off the open market at a lower price. Was there a broker physically sitting there screwing me on purpose? No way–my order doesn’t matter. Could they have computer algorithms programmed to do this kind of thing automatically? Absolutely possible, and easy arbitrage money. Don’t treat your data or your chart as gospel!
Lesson two is that your stop order will be sent to market if the National bid (or offer if you are short) hits your level. It’s not if price trades there, it’s not even if the “bid” or “ask” that you see streamed hits there. The stop is sent if a number you can’t see hits your level, according to your broker’s word alone. I don’t even trust my own mother that much! They can’t get too far off from the publicly quoted numbers, or a lot of people will get really mad. But there are bids, offers, trades, and even probably volume that takes place off the books, so to speak. Beware! Place physical stop orders with your broker at your own peril!
The final lesson is that I should have avoided the $209.10 round number. This is the one thing I could have controlled, and the one area where I made a mistake. I’ll put in my stops away from any even levels from now on, if I use physical stop orders again. I wouldn’t at all, except that I’m afraid that I’d get screwed if I lost my data connection just as I was going to exit a position manually. I guess the problem I had today is a byproduct of having that insurance in place. I suppose it’s better to lose 1R as a fluke than 4R or more. Either way, avoid any kind of round number for your stop!
Trade Summary:
RIMM Short
Entry: $208.52, Stop: $209.10, Target: Scalp (point or two)
Exit: $209.0894, P/L: -0.99R
Trade Grade:
UPDATE: The tick seems real, and my stop order should have filled as it did. The only thing that didn’t perform up to standards was my stop selection and TD’s lousy LI quote feed, which only passes on some of the info in real time.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| RIMM |  |  |  |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
July 11th, 2007 at 8:57 am
i’m not familiar with ameritrade, but on ib u can have your stop go off on the last, bbo, or a few other options…if they don’t offer that, then u may want to change brokers…richard has always received good service from scottrade
i was burned by a discount broker quite awhile back and made the switch to direct access…much happier over here
July 11th, 2007 at 9:08 am
Perhaps the T&S streamed from TD Ameritrade just sucks. I’m not sure it necessarily follows that you should tell people not to believe the data from their broker, or that you should fantasize about brokers trying to screw you “off the books.”
July 11th, 2007 at 9:20 am
John has a point about the stop triggering, not sure it would have helped here but I use double print with IB to get me out. Avoids the bad tick syndrom but may result in greater slippage.
Pity about the loss. Our data will never be 100% accurate, this is just one of those things that happen every now and then and there ain’t much we can do about it.
July 11th, 2007 at 9:53 am
@John: Just a retail discount broker, so not much customization. I’ve been exploring my options for a while now.
@Richard: Perhaps just TD’s T&S sucks, but can you say for sure? My purpose is not to say that nobody’s data is right, but that mine isn’t, and you’d be wise to check yours.
Fantasize? Maybe it’s fantasy about the “screwing arbitrage programs”, but the fact is that there are trades and quotes that don’t show up in my T&S, and lots of them. There might be in your data, as well. Does that concern you?
I thought my T&S reflected all of the trades, but it doesn’t–not even close, according to the TD rep I spoke to. How do I know if the volume for the day is even accurate? When I look at a chart to place a stop, there may be hidden trades that don’t show up that reflect support or resistance differently. It shouldn’t affect you unless you happen to be on the razor’s edge, like I was today. It just steams me that I was stopped without the charts and data showing it–probably not a conspiracy, but definitely something for people to be aware of.
@Eyal: Yes, not much we can do about it–it’s part of the business, unfortunately. If I can more intelligently place my stops it should help to minimize the occurrence.
July 11th, 2007 at 9:53 am
That’s tough, Prospectus. I’ve had that happen several times - very frustrating.
Here’s an order template that I set up in CyberTrader to get around this.
July 11th, 2007 at 10:45 am
Sorry, dude, I just don’t go in for conspiracy theories.
I thought it might be quotetracker’s fault, because I know they only poll every 0.5 seconds or so for quotes (meaning I can’t trade off their L1 data). But, I viewed the T&S from Ameritrade and Scottrade both on QT, and the difference was huge. My conclusion: Ameritrade’s T&S feed sucks… or maybe only shows nasdaq events, or something.
If the trade was for less than 100 shares, then I would expect a lot of platforms wouldn’t have it in their feed. If it was for more than 100 shares, I’d definitely expect to be able to find it in my T&S info.
There are lots of brokers out there, so if you really are concerned about “off the books” actions against you, I hope you don’t hesitate to take your money elsewhere.
July 11th, 2007 at 11:35 am
Yes, you’re right. I just tried them both and there’s a huge difference. Scottrade’s prints all over the place, and TD only gives you a print or so every second.
Conspiracy averted, TD’s datafeed just sucks. More than likely the ticks today would have shown up in a better datafeed.
July 11th, 2007 at 11:58 am
back when I was stupid and using Etrade (gasp) as my broker I had something very similar happen. I was using a bracketed order and I was stopped out without price every showing the price hitting my stop. Turns out that Etrade uses a number of various data services and one of them did indeed hit my stop. They said this data service was included in the fine print of my agreement. It was bullshit. I was going to switch over to IB anyway, but this was just the last straw and I started the switch the very next day. Not sure if this was the case with Ameritrade… but as I explained to Etrade… every penny counts with a daytrader and if I can count on the data that’s presented in front of my screen… why use the service.
July 11th, 2007 at 12:06 pm
I just blew away the data that was calculated from my live feed, and backfilled the chart with TD’s server-side data, and the chart does indeed now show a tick at $209.11, so basically, there was no screwage going on. I just don’t get all the info streamed to me live, just a representative sample. This makes the LI data useless to trade from, as Richard described above. However, since the charts are created in real time from this same information, that leaves my charts in a dubious state as well…
Any data sources out there that stream on http protocols through port 80?
July 11th, 2007 at 8:57 pm
Hi Prospectus,
I don’t see why avoiding a round number for stop would help. If you had placed $209.11, it would’ve been hit as well. And if you had placed $209.12, there could’ve been a BBO at $209.12 or $209.13. Getting stopped out is the purpose of a stop loss order. I think we could only 1) use stop loss triggered at last price, 2) place a wide stop or 3) accept being stopped out.
July 12th, 2007 at 4:47 am
i had several similar issues happen at TD. i even got executed at prices outside of the day’s range even on the daily chart. i.e. even after the market closed and all data was “final” my execution price was still outside the range for the day… after getting tired of them telling me it is my fault i just switched to direct access…
September 21st, 2007 at 12:57 pm
Sorry for posting on an old thread, but thought I’d add my experience…
I just had this happen to me with E-Trade, but with a bit of a rub. I had a “one cancels all” order. The stop and limit were about $14 apart, with the current price about $3 from the stop. The stop was hit. T&S shows nothing even close (it hasn’t traded near the stop since pre-fed Tuesday).
I’m waiting for E-Trade’s response.
I have accts with TD, E-Trade, and IB. I’ve had IB “software” foul-ups, but I must say, I haven’t had some of the “money” problems I’ve had with TD and E-Trade. Time to close the other two. I like having more than one acct, though. I’ll have to find another one.