Limit vs. MIT

Hello, I am somewhat new to day trading the S&P E-mini. When entering a trade is it better to use limit orders or MIT orders? I have been taught to use limit orders, but I have missed a lot of good trades because my limit orders did not get filled. What do you guys recommend?

Welcome to the forum iDoc and to trading the E-mini S&P500.

There should be a fairly easy way to work out which is best for you and your trading methodology. Hopefully, you've kept some records of the trades that you've taken and if we're very lucky then you've kept records of the ones that you've missed but would have taken using MIT (Market If Touched) and also the draw downs on the successful trades.

First of all, all of your previous entries would have been at least 0.25 points worse and sometimes 0.5 points worse.

If you're using a hard stop (say 2.00 points) then you need to locate all the trades that were profitable, but only squeeked by not being stopped out. With a MIT order and a hard stop those would have all been stopped out at losses.

You also have to locate all of your profitably closed out trades and make sure that none of them "just" closed at the top of the move before the price headed to your stop or trailing stop. Those too would not have recorded the same profits.

Then, finally, add in all the profits of the trades that would have been filled had you used MIT orders.

This is a fair amount of work to do but you will be surprised at what an eye opener it is. Even though on the face of it you might think that you're missing great trades using limits and not MIT, when you do the bean counting you may discover that limit is more profitable for your strategy.

It would be impossible for anybody to answer your question with one or the other answer. Some traders will be more profitable using MIT over limit but that might also be a factor of the system that they're using. If, for example, they are using a certain precalculated level for their stops and targets (i.e. not using a number of fixed points) then it will be easier for them to calculate which is better because their historical trades will accurately reflect the stops and targets using either method.

Let me know if that helps.

Thanks for the reply. I will do as you suggest. I will let you know if I come up with something conclusive.

Let me add something to this from a different angle. Keep in mind this applies more to an 'intraday swing trading' approach like I take than a scalping mode. For example, in the Russell mini, which is my preference, I'm targeting 4 point moves and up, and my methodology would then have me riding with them until they are exhausted. In my opinion, for my methodology, missing a move is way more costly than getting a fill at a specific tick. If liquidity is there, I prefer market orders when I get my signal. Nonetheless, limit is what many prefer.

Some front ends give you the option of 'limit chase'. The one I like (no advertisement here, I have no affiliation, just making some information available for people to look over) is Button Trader. I am not recommending it, only giving an example here. You can set it, for example, to buy at a limit of so and so, and 'chase' it say three times (or as many times as you want). You can set it in just about every way you can think of. It will cancel and replace and if it doesn't fill, it will bounce it up a tick (or two ticks if you want, or whatever), and I think it can also be set to wait different amounts of time between chases, like try once and move, or wait one or two secs, etc. (you'd have to check this). This allows one to stay with the security of a limit, not taking the chance on a 'bad fill' with market, but not missing an order that doesn't fill if it moves. If it moves fast, an 'illiquidity gap', you likely won't get a fill. It's a 'middle ground'. If one's methodology is such that a fill only at that particular tick is critical, then this wouldn't be any potential help, but my methodology isn't in that category. Hope this helps, or gives everyone something to research.

Thanks Jim!

Do you use the "chase" feature on Button Trader for a real trades? I use Ninja and it also has a chase feature but I've only used it in sim mode to watch it work - never used it on a real trade.

I use Strategy Runner and it has a similar feature called Smart Orders. Smart Orders are sent as a limit order first, if it is not filled in a specified length of time then it is cancelled and a market order is sent. I think I may talk to tech support on how to use this feature.

iDoc - Does your methodology target larger moves (4 points and above) or is it more of a scalping strategy?

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Originally posted by day trading

iDoc - Does your methodology target larger moves (4 points and above) or is it more of a scalping strategy?

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My objective is 1.5 to 2 points per trade for ES and sometimes 2.5 to 3 points depending on how volatile the market is. I typically follow the trends and enter on pull backs. I use fibs, ma, ema, and Keltner channel to help me find entry points.

When I see an entry coming, I plan my trade and then place my limit order with a bracket.

If I use MIT orders, how much slippage should I expect and what would be the max slippage?

Standard slippage for MIT is 0.25 points assuming that you would have originally entered at the "touched" price. In some cases, if the market moves fast or a big order consumed the touched price as well as the price before it then you will have zero slippage, which would be rare, and in even rarer cases you will have positive slippage if the market is thin and a large order comes through.

The max slippage is theoretical becuase by the time your trading systems order hits the wire a number of other orders could be ahead of you causing a run in that direction so it could be big - but again that would be rare. You will get 0.5 point losses every now and then as the price is touched by 1 contract and then immediately trades back to where it was.

Is there such a concept on your trading platform as "Limit If Touched"? LIT? It seems like a logical option to have although I haven't looked for it.

Say we want to enter a long at 1230.00 and we are prepared to use an MIT to enter at 1230.25. We could enter a LIT where the T (touched) is 1230.00 and the L (limit) is long at 1230.25. That way we limit the slippage to 0.25 points max but at the risk of missing the odd rare trade. However, having the limit in there will put it right at the front of the queue (because you automatically entered the limit as the price below was touched). The LIT order would also get you a better price if the market traded down quickly when it went in: Say 1230.00 was touched and as your system put in the LIT the market traded to 1229.50 to 1229.75 before your order hit the markert, you would get the 1229.75 price instead of the 1230.25 so giving you a 0.5 point improvement - again this would be a rarity but a possibility.