Stop Trigger Shooting off Early? (Trigger Misunderstanding)

#1

Darrell,

In one of my recent posts on a different topic I had stated that the stop trigger sometimes shot off early particularly on US Tech. I placed some night time Iron Condors a few hours ago and once again the US Tech shot off way early.

Here is my scenario: I sold the upper 4300-4340 contract and bought the lower 4260-4300 contract. My trigger on the upper was 4270.5 and on the lower it was 4329.5. I had an offset of 10 set on both sides and nothing set for worst limit. The trigger on the lower just shot off and filled at 4323.7. Movement is very slow. The price for that contract is still 6 points away. Curious if this has ever been an issue and/or if I need to do something differently.

Thanks for the help.

Jeff

#2

Hi Jeff, I took exactly the same trade, just my stop was at 4326 on the lower, the trigger shot off at price 4322.9 so it is not you its the issue with the stop trigger, I never noticed it on forex just on nasdaq. Thanks

#3

It happened to me again. Thankfully I am still trading in demo! The triggers shot off so early I got stopped out on both sides. Here is a screenshot of my tickets:

2017-12-04_2138.png844x731

I am stumped. If this continues I will have to discontinue trading US Tech once I go Live. Perhaps I am doing something wrong as well. Maybe it is a demo issue? Anyone please advise if there is a solution. In the meantime I will continue to trade and troubleshoot on my own. Thank you.

#4

Hi,

I will take a stab at what I think is going on. I invite anyone to please correct me if I am mistaken. There are two very different things to be aware of here and that is the UNDERLYING PRICE and the SPREAD PRICE. Remember that the spread price has the premium of time built into it so it does not necessarily move exactly as the underlying price. It will move closer to the underlying when it is in the middle of the spread and there is less time involved. So going back to the stop trigger you will notice that it places the order once the UNDERLYING PRICE is triggered. So, the underlying price reached the trigger price and at that exact moment the price of the spread was executed which was X ticks away from the underlying hence you believe it triggered early but it didn’t.

I think what you are wanting to do is have the order be executed once the SPREAD PRICE is triggered. However, this can only be done if you are sitting in front of the computer when the spread price reaches the desired target because all orders are LIMIT orders. This means that if you set a working order for the spread price to be executed when it reaches that price it will execute it immediately because the market price is better than the desired spread price order and it will take you out of your trade.

So the only option I think is to set the trigger price further away or baby sit the trade.

Hope this answers your question.

#5

@stanz80 and @jmart69

I believe @lionking is correct. When the indicative hits the trigger price the order is submitted at the current spread price +/- offset.

The stop trigger is based on the indicative price not the spread price.

ie trigger 4330 when indicative hits 4330 it will execute the spread at the market limit price of the spread +/- (depending on direction) of the offset . So it appears you interpreting spread price as trigger when actually indicative price is the trigger.

No one else is reporting this issue and it works the same on all instruments. So the only thing I can imagine is your are misunderstanding what the trigger price is notice it says Underlying price is triggered. Maybe also show the order history so we can see the time of the trigger and look at the indicative price to see if it was triggered early or not.

From this point it looks like it just a misunderstanding of what the trigger price is. Let us know how we can help you further.

#6

Darrell / lionking,

Yes I think that is it. I am looking at spread/market price rather than underlying/indicative. In many cases I have seen a stop trigger activate right when the market price is hit. Although I have not verified, it could have been at times when it was equal to or very close to the underlying.

I have however verified these US Tech trades by looking at the charts. The charts indicate that the current price was right in the vicinity of where the trigger activated, which likely means that the Nadex indicative was too. So I was misunderstanding the trigger price.

I have attached my order history reflecting the US Tech stop triggers for that day. I have also attached my log for that day as well:

If you look at the chart for that day you will see that I would have actually been stopped out on both sides (and lost twice as much) anyway even if the triggers were activating at the spread price. The stop triggers don’t seem to much of an issue trading any other instrument (so far). On US Tech I believe there is usually a larger gap between the spread/market price and the underlying/indicative price. Perhaps because of the daily high volatility of NQ?

Nonetheless I believe I now have a firm grasp on how the stop trigger works. This is why you trade Demo first! Thanks so much.

Jeff

#7

US Tech 100 spreads do have larger premium than other spreads do to their width being smaller and their tick value being faster than the underlying market NQ