How to Attach a Bracket to an Order

 

 

 

Definition of, and how to attach a bracket to an order.

How to add an OCA Group

Example of how to attach a bracket to a preexisting position by defining an OCA group for the stop and profit taking orders.

Overview of the Scale Trader Algorithm

Overview: 

The ScaleTrader is a sophisticated trading algorithm which allows one to enter a large quantity order that is executed in a series of increments or components, with each component being executed at a progressively better price.

When to Use
The use of this algorithm is well suited to situations where a stock is trading at or near the bottom of a trading range and the trader is looking to average down, buying into a declining market. Alternatively, it may be used on the opposite side when the trader is looking to sell into the top of the trading range, perhaps scaling out of a long position. In either situation, the Scale Trader algorithm also allows the trader to scalp the market, submitting opposite profit taking orders against the original order.
 
How to Locate
The Scale Trader can be accessed from the TraderWorkstation by selecting the Trading and then Scale Trader menu options at the top of the page or it can be added to the trading toolbar menu by clicking on the Add More Buttons icon.
 
Order Set Up
Once the trader has defined the instrument and action (buy or sell), five parameters will need to be specified. Traders will also need to define the order type and time in force. These five parameters for a stock purchase (sale) would be as follows:
 
  1. Total Order Size (TOS) – the total number of shares the trader is willing to purchase (sell) as the price falls (increases);
  2. Initial Component Size (ICS) – the number of shares to be purchased (sold) at the Starting Price;
  3. Subsequent Component Size (SCS) – the additional number of shares to be purchased (sold) at each Price Increment (at successively lower prices in the case of a purchase and higher in the case of a sale). If a SCS is not entered, the ICS will be used for all component orders.
  4. Starting Price (SP) – the price at which you are willing to purchase (sell) the Initial Component Size
  5. Price Increment (PI) – in the case of a purchase (sale), this is the decrease (increase) in price at which each successive component order is to be executed.
Based upon the inputs provided to those parameters, the Scale Trader application will calculate a Top Price (TP) and a Bottom Price (BP) which, depending upon the buy or sell action selected, will either determine the price at which the last order will be executed (BP for purchases and TP for sales) or be relevant only if the same scale is used to close or restore the size of the position (TP for purchases and BP for sales). Adjustments made to either of these two factors will be reflected in the PI and their calculations are as follows:
 
  1. TP = (((ICS/SCS) -1) * PI) + SP
  2. BP = SP – (((TOS - ICS)/SCS) * PI
Note that once a product symbol has been entered a price chart will be displayed to assist in specifying the parameters. The algorithm will not be activated until the Transmit button has been clicked and once transmitted will run indefinitely until stopped or changed or it encounters conditions where it stops. It's important to note that this particular algo will continue to run even if the trader is not logged in to the TWS.
 
Example
Assume a GTC limit order is entered into the Scale Trader to buy 1,000 shares of hypothetical stock ABC having a NBBO of $19.95 - $20.00 at a starting price of $20.00 with 500 more shares purchased at every $0.05 down, resulting in a maximum position of 4,000 shares. The five parameters for this order would be as follows:
 
  1. TOS = 4,000;
  2. ICS = 1,000;
  3. SCS = 500;
  4. SP = $20.00
  5. PI = $0.05
This order would be then be scaled into 7 components consisting of one at 1,000 and 6 at 500 each. The first component is submitted at $20.00 and after it fills the next component (500) would be submitted at $0.05 lower. That order would wait until marketable and once it has been filled the next component will be submitted. This pattern continues until all components have been filled or the order has been cancelled.
 
Managing the Trade
  1. Profit taking orders – the Scale Trader may be set to send an offsetting order to take advantage of periodic price surges or if the trader has reached a specified profit objective. This feature may be enabled by checking the box titled “Create profit taking order” and specifying the Profit Offset. Using the example above and a Profit Offset of $1.00, once the ICS was filled at $20.00 and an SCS submitted at $19.95, two profit orders would also be submitted, one for 500 shares at $21.00 and another for 500 shares at $21.05. It should be noted that profit orders are scaled to the SCS regardless of the size of the ICS and that if the ICS > SCS then the profit order price is determined using the PI along with the Profit Offset. 
  2. Restore size after taking profit – if using the profit taking orders feature, the trader can enable the repurchase of shares sold at a profit at the price they were originally bought at by checking the box titled “Restore size after taking profit”. This feature remains active whenever the price is within the range of TP + Profit Offset and BP. Using the example above, if order to sell 500 shares at $21.00 was executed this fill quantity would be put back into the original order at $20.00 and the order submitted at $19.95 would be cancelled.
  3. Restart Scale Trader & Restart Scale Trader with Filled Component Size – these features allow traders using the profit taking order and restore size features to restart the algorithm if stopped, helping to resume the order starting from the point at which the scaled sequence left off.
  4. Auto Price Adjustment – selecting this check box allows for an increase or decrease in the starting price automatically at stated time intervals (e.g., increase $0.01 every hour)
  5. Scale Trader Page – provides a view of the real-time status of scale orders, including filled and total quantity, filled, remaining, and total value, and the percent filled for each scale. Accessible via the Page and then Create Scale Trader Page menu options.
  6. View Scale Progress - right-click on the scale order line and select View Scale Progress. This will open a window displaying the complete scale price ladder, the Open/Filled component list for the parent scale order, and the Open/Filled component list for the child profit orders.
Other Considerations
Acceptable inputs for this algorithm include:
  1. Products – any product offered by IB other than mutual funds (e.g., stocks, options, ETFs, bonds, futures, Forex);
  2. Order Type - limit or relative (relative not offered for combination orders)
  3. Time in Force – Day, Good-til-Cancel or Day-til-Cancel. May also specify if order is allowed to be filled outside of regular trading hours, if executions may be routed and executed during pre-open session and whether to ignore opening auction.

 

How do I enter the symbol for Berkshire Hathaway Class B shares onto TWS?

Overview: 

There are a variety of symbol conventions for denoting Berkshire Hathaway Class B shares (CUSIP 084670207).  On the IB trading platforms, this security is designated by entering BRK, then a space and then B (BRK B).  This compares to Bloomberg which uses the convention BRK/B and Yahoo Finance which uses BRK-B.

 

It should also be noted that this security has been designated as a 10-share unit issue by its primary listing exchange, NYSE Arca, due to its relatively low trading volume. A round lot in this security is therefore set at 10 shares as opposed to the standard round lot unit of 100 shares.  If your opening buy or sell order is for an amount less than 10 shares, it is considered an odd-lot and subject to  special handling considerations.   Please review our website under the Trading and then Order Types menu options for additional details.

What is the difference between a stop, and a stop limit order?

Overview: 

 

Stop orders are the simpler of the two.  Stop orders are triggered when the market trades at or through the stop price (depending upon trigger method, the default for non-NASDAQ listed stock is last price), and then a market order is transmitted to the exchange.  A buy stop is placed above the current market price.  A sell stop order is placed below the current market price.  Stop orders may get traders in or out of the market.  The risk associated with stop orders is that they don’t guarantee a price.  When a buy stop order triggers, the market order is transmitted and you will pay the prevailing ask price in the market when received.  When a sell stop order triggers, the market order is transmitted and you will pay the prevailing bid price in the market when received. 

 

Stop limit orders are slightly more complicated.  Account holders will set two prices with a stop limit order; the stop price and the limit price.  When the stop price is triggered, the limit order is sent to the exchange.  A limit order will then be working, at or better than the limit price you entered.  With a stop limit order traders are guaranteed that, if they receive an execution, it will be at the price they indicated or better.  The risk associated with a stop limit order is that the limit order may not be marketable and, thus, no execution may occur.  A sell stop limit order is placed below the current market price.  When the stop price is triggered, the limit order is sent to the exchange and a sell limit order is now working at, or higher than, the price you entered.  A buy stop limit order is placed above the current market price.  When the stop price is triggered, the limit order is sent to the exchange and a buy limit order is now working at or lower than the price you entered.

 

Background: 

Be aware that if you enter these orders on the unintended side of the market, you could be filled immediately at the current market price.  Consider for example a buy stop order.  Buy stop orders should be entered above the current market price.  When the market trades up to or through the stop price, a market order is sent.  If an account holder were to incorrectly enter a buy stop order below the current market price, the system would correctly note that the market had already traded through the stop price, and a market order would be instantly sent.

My open order doesn't appear to working, why not?

Overview: 

In the case of orders that have been placed, but do not appear to be acknowledged, you must contact IB via telephone immediately.  We will need to contact the exchange in these cases.  Communication through web tickets is not real time, and can not be used for issues of an urgent nature.  Requests for trade cancellations/fills must be made within the time limits set by the relevant exchange.  Many equity exchanges have a notification period of 30 minutes or less.  Derivative exchanges have notification periods as short as 5 minutes.  Requests for trade cancellations should be made by telephone or the Bust Request tool (no email or other non real-time method) to IB within 15 minutes of the erroneous transaction.  IB requires sufficient time to prepare the necessary information required by the exchanges and this time is included in the exchange-specified reporting period.  Requests for cancellation are always handled on a best-efforts basis and IB cannot guarantee the reporting time requirements.  In addition, exchanges have bust request fees that account holders must agree to before IB can proceed with the request.  The fees vary by exchange, and you will be informed of what that fee is for the exchange in question prior to the bust request filing.

How do I add the field OCA Group to my Trader Workstation trading page?

Overview: 

Towards the top right corner of the TWS Order Management Screen, you will see a "Trader Workstation/Ticker Lookup" search field.  Immediately to the left of this you will see a wrench shaped icon.  Click the icon.  From here, click on the Order Columns tab from the TWS Configuration window.  On the right side under Available Columns, click on Order Attributes to expand that selection and see all of your choices.  Click on OCA Group so that it is highlighted.  Then click on the Add button.  This will add OCA Group to the Shown Columns list.  Now click on the Apply button at the bottom of the window, and then the OK button.  The OCA Group column should now be on your TWS Order Management page.

Add Remove Liquidity

Overview: 

The goal of this article is to provide proper understanding of exchange fees, add remove liquidity fees, for un-bundled commission schedule.

 

The concept of adding or removing liquidity is applicable to both stocks and stock/index options. Whether or not an order removes or adds liquidity is dependent on that order being marketable or non-marketable.

Marketable orders REMOVE liquidity.
Marketable orders are either market orders, OR buy/sell limit orders whose limit is at or above/below the current market.

1. For a marketable buy limit order, the limit price is at or above the Ask.

2. For a marketable sell limit order, the limit price is at or below the Bid.

Example:
XYZ’s stock current ASK (offer) size/price is 400 shrs at 46.00. You enter a buy limit order for 100 XYZ stock @ 46.01. This order will be considered marketable because an immediate execution will take place. If there is an exchange charge for removing liquidity, the customer will be charged that fee.


 

Non-Marketable orders ADD liquidity.
Non-marketable orders are buy/sell limit orders in which the limit price is below/above the current market.

1. For a non-marketable buy limit order, the limit price is below the Ask.

2. For a non-marketable sell limit order, the limit price is above the Bid.

Example:
XYZ’s stock current ASK (offer) size/price is 400 shrs at 46.00. You enter a buy limit order for 100 XYZ stock @ 45.99. This order will be considered non-marketable, because it will be posted to the market as the best bid, and instead of being immediately executed.
If and when someone else sends a marketable sell order that causes your buy limit order to be executed, you should receive a rebate (credit), if an add liquidity credit is available.

PLEASE NOTE:
1. All accounts trading options will be subject to any options exchanges’ remove/add liquidity fees or credits.
2. Per IB’s website, only negative numbers under the Remove Add Liquidity schedules are rebates (credits).

http://individuals.interactivebrokers.com/en/accounts/fees/commission.php?ib_entity=llc
Above link reference stocks and options commissions/fees

What is the meaning of removing from, or adding liquidity to, the market?

Overview: 

 

The first point to understand is what a marketable order is.  Marketable orders are either market orders, or buy and sell limit orders whose limit price is at or above/below the current market price.  A marketable buy limit order would have a limit price set at or above the current ask in the market.  Conversely, a marketable sell limit order would have a limit price set at or below the current bid in the market. 

 

Marketable orders remove liquidity from the market. 

 

Non-marketable orders are buy and sell limit orders in which the limit price is below/above the current market price.  A non-marketable buy limit order would have a limit price that is below the current ask in the market.  Conversely, a non-marketable sell limit order would have a limit price that is above the current bid in the market. 

 

Non-marketable orders add liquidity to the market.

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