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Take profit - is it a limit or stop order?

  • #1
  • Quote
  • First Post: Aug 1, 2012 8:16pm Aug 1, 2012 8:16pm
Guys I have a question. I have always thought that Take Profit is a limit order - a bid or offer on the book of ECN exchange. It looks like I was wrong, at least on MBT demo. A Take Profit on an existing buy order didn't get executed until the bid reached the price - same as with any Market Maker. When I tried to close my position with a separate limit sell order - an offer - the system declined to do that explaining that hedging is not allowed. Some voodoo BS! I'm pretty sure it works on futures, but does it work the same way on other ECNs like Currenex, Dukascopy?
  • #2
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  • Aug 2, 2012 3:59am Aug 2, 2012 3:59am
"A Take Profit on an existing buy order didn't get executed until the bid reached the price"

You are confused.. a TP on an existing long position is a limit sell order, which will be filled if bid px is at or greater than your limit.
  • #3
  • Quote
  • Aug 2, 2012 6:26am Aug 2, 2012 6:26am
Quoting seagreen
Guys I have a question. I have always thought that Take Profit is a limit order - a bid or offer on the book of ECN exchange. It looks like I was wrong, at least on MBT demo. A Take Profit on an existing buy order didn't get executed until the bid reached the price - same as with any Market Maker. When I tried to close my position with a separate limit sell order - an offer - the system declined to do that explaining that hedging is not allowed. Some voodoo BS! I'm pretty sure it works on futures, but does it work the same way on other ECNs like...
Any time you sell whether it is to initiate a short or to liquidate a long you must do so at the bid. Likewise anytime you buy regardless of whether your are initiating a long or liquidating a short, you must do so at the ask.

Simple clean...learn it, know it, Live it.
  • #4
  • Quote
  • Aug 2, 2012 7:07am Aug 2, 2012 7:07am
Quoting shrike
"A Take Profit on an existing buy order didn't get executed until the bid reached the price"

You are confused.. a TP on an existing long position is a limit sell order, which will be filled if bid px is at or greater than your limit.
Well, a limit sell order is supposed to be executed when it becomes ask and a market buy order hits it, isn't it?
  • #5
  • Quote
  • Aug 2, 2012 7:07am Aug 2, 2012 7:07am
Quoting gspajon
Any time you sell whether it is to initiate a short or to liquidate a long you must do so at the bid. Likewise anytime you buy regardless of whether your are initiating a long or liquidating a short, you must do so at the ask.

Simple clean...learn it, know it, Live it.
You are talking about market orders.
  • #6
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  • Aug 2, 2012 7:11am Aug 2, 2012 7:11am
Well, anyway, I just realized I was doing it on MBTrading EXN which is not a true ECN exchange. There's no commission so they need to make money on the spread. So I'll try to do the same thing on MBT Pay For Limits which is supposed to be a true ECN. If it doesn't work as I was hoping that means MBTrading is not a true ECN broker.
  • #7
  • Quote
  • Aug 2, 2012 9:37am Aug 2, 2012 9:37am
Maybe this is obvious but...

Are you using MT4 Platform? It appears that your broker doesn´t allow hedging so if you want to close your existing Buy order at Take profit and you are trying to do so by placing a Sell Limit order, MT4 assumes that you want to keep the Buy order open and at the same time open a new Sell Order, that's hedging and not allowed, so you have to modify the Buy order and configure its Take Profit Value..

Regards
  • #8
  • Quote
  • Aug 2, 2012 9:43am Aug 2, 2012 9:43am
Quoting masilva
Maybe this is obvious but...

Are you using MT4 Platform? It appears that your broker doesn´t allow hedging so if you want to close your existing Buy order at Take profit and you are trying to do so by placing a Sell Limit order, MT4 assumes that you want to keep the Buy order open and at the same time open a new Sell Order, that's hedging and not allowed, so you have to modify the Buy order and configure its Take Profit Value..

Regards
I tried it on MT4 and as I said, Take Profit on an existing buy order didn't get executed until the bid reached the price. So it didn't behave like an offer (limit order). Do you know if I can open and close position using buy and sell limit orders on MBT Desktop?
  • #9
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  • Aug 2, 2012 11:00am Aug 2, 2012 11:00am
Quoting seagreen
You are talking about market orders.
When a stop loss or limit order fires it becomes a market order. It is executed at the bid (sell) and the ask (buy) no matter how you look at it.

If you are talking about pending entry orders those are slightly different but a stop loss and/or limit order is as I described.
  • #10
  • Quote
  • Aug 2, 2012 11:03am Aug 2, 2012 11:03am
Quoting seagreen
I tried it on MT4 and as I said, Take Profit on an existing buy order didn't get executed until the bid reached the price. So it didn't behave like an offer (limit order). Do you know if I can open and close position using buy and sell limit orders on MBT Desktop?
lol dude.... 5 vouches and you don't know how the market operates? (yea I don't know why I'm being a douche)

limit order didn't get lifted since most of the volume goes through EBS and Reuters Dealing platform....price went up/down because banks updated their bid-offers based on the movement on EBS and Reuters

most of the time you can expect your limit orders to get executed only as the price runs through your position (essentially as a market order)
  • #11
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  • Aug 2, 2012 11:50am Aug 2, 2012 11:50am
Quoting gspajon
When a stop loss or limit order fires it becomes a market order. It is executed at the bid (sell) and the ask (buy) no matter how you look at it.

If you are talking about pending entry orders those are slightly different but a stop loss and/or limit order is as I described.
Ok, I'm talking about a real exchange, like ECN (which MBT pretends to be), not a market maker. A limit sell order on exchange IS the ask when there's no other lower sell limit order on the exchange. And it is executed against a market buy if there comes one. This are the rules of the exchange, this is how the market operates.

What you're talking about is the way a market making broker operates. They make money on the spread and that's why any client's sell (buy) has to be executed at the bid (ask). Hope this makes it clear.
  • #12
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  • Aug 2, 2012 11:59am Aug 2, 2012 11:59am
Quoting Rikers
lol dude.... 5 vouches and you don't know how the market operates? (yea I don't know why I'm being a douche)

limit order didn't get lifted since most of the volume goes through EBS and Reuters Dealing platform....price went up/down because banks updated their bid-offers based on the movement on EBS and Reuters

most of the time you can expect your limit orders to get executed only as the price runs through your position (essentially as a market order)
Actually I do know a little about the markets, however I have trouble understanding your post. Anyway, can you tell me if I can enter and exit the same position with a bid and offer on Currenex/Dukascopy or other real ECNs? It seems MBT does not allow that.
  • #13
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  • Aug 2, 2012 12:51pm Aug 2, 2012 12:51pm
Quoting seagreen
Actually I do know a little about the markets, however I have trouble understanding your post. Anyway, can you tell me if I can enter and exit the same position with a bid and offer on Currenex/Dukascopy or other real ECNs? It seems MBT does not allow that.
yes, even at MBT you will be put in their central limit order book...

the problem is, FX is not centralized at MBT, Dukascopy etc... trading it is mostly centralized on the EBS and Reuters, that means when you post a limit order out side those two exchanges don't expect for your order to be lifted; what will happen is someone will lift an order on EBS and all the banks will update their price on all other exchanges, that is why price moves on MBT even when no one is trading

As a consequence of that the smaller the volume traded on an ECN the less likely is for you to get lifted on bid/offer (and it's very unlikely since most volume goes on EBS and Reuters). That means you get mostly executed when your bid is run over by an opposing wall of offer orders and vice verse effectively executing it as an market order (it depends how you look at it because technically you'll be still executed as a limit)
  • #14
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  • Aug 2, 2012 1:33pm Aug 2, 2012 1:33pm
Quoting Rikers
That means you get mostly executed when your bid is run over by an opposing wall of offer orders and vice verse effectively executing it as an market order (it depends how you look at it because technically you'll be still executed as a limit)
That's something I didn't know. So lets suppose I enter a bid on Currenex at 1.2160 and the market is trading 1.2160/609. Then it moves down to 1.21599/1.21605. What you're saying is that my order can still remain in the book unfilled because there were no market sells on this particular ECN, right?
  • #15
  • Quote
  • Aug 2, 2012 1:51pm Aug 2, 2012 1:51pm
Quoting seagreen
That's something I didn't know. So lets suppose I enter a bid on Currenex at 1.2160 and the market is trading 1.2160/609. Then it moves down to 1.21599/1.21605. What you're saying is that my order can still remain in the book unfilled because there were no market sells on this particular ECN, right?
yes, look at a tick chart with your order and you'll see just that


the only benefit of ecn is that since banks know this is highly retail volume they tend to have more competitive spreads on it, so it's beneficial for market entries
  • #16
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  • Aug 2, 2012 2:03pm Aug 2, 2012 2:03pm
Ok, thanks, that clarifies a lot.
  • #17
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  • Last Post: Edited 5:10pm Dec 12, 2012 4:55pm | Edited 5:10pm
Quoting Rikers
yes, look at a tick chart with your order and you'll see just that


the only benefit of ecn is that since banks know this is highly retail volume they tend to have more competitive spreads on it, so it's beneficial for market entries
I disagree with you. Today pic with Dukascopy, I make bid and order fills just at bid.

Like Seagreen says I only can place BID/ASK orders at entry and not at TP.

http://i47.tinypic.com/ea5z4k.png

On Fx futures you can make 10 pips with a BID/ ASK move of only 9 pips. (1 pip spread)
On ECN (Duka) you can make 10 pips with a BID /ASK move of 10 pips.
On Market Maker (Oanda) you need a 11pip BID/ASK move to make 10 pips.

żAnybody knows an ECN broker that allows place BID /ASK on entry and TP?
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