Williama:
I think I understand. Could you please look at this and tell me if it is correct.
Let's say our "median price" is 202.50 and for the sake of easy calculations, our grid spacing is .50.
Buy#3 = 204.00
Buy# 2 = 203.50
Buy # 1 = 203.00
---->> 202.50 <<-----
Sell #1 = 202.00
Sell# 2 = 201.50
Sell # 3 = 201.00
If for example, initially our first BUY level is hit, we place 2 buy stop (pending) orders ABOVE our first buy level, and 3 sell stop (pending) orders below at their respective levels. If we are trading 0.1 lots and a buy stop order is triggered first (as in the example above), then all of our pending buy stop orders would automatically be set at 0.1 lots, while we would "double up" on all of our initial sell stop orders at 0.2 lots.
Buy#3 = 204.00 (pending = 0.1) /actual lots executed = 0
Buy# 2 = 203.50 (pending = 0.1)/actual lots executed = 0
Buy # 1 = 203.00 (pending = 0) / Actual lots executed = 0.1
Our Sell stop level orders look like this...
Sell #1 = 202.00 (pending = 0.2)
Sell# 2 = 201.50 (pending = 0.2)
Sell # 3 = 201.00(pending = 0.2)
Now, let's assume that we have our first buy stop level triggered but then the price turns around and triggers our first pending sell stop at 202.00. We then place more pending orders (which are added to the existing pending orders)... We would ADD a pending order to each of our 3 buy stop levels AND to our 2 lower sell stop levels (pending orders are not added to the level that is triggered). Our buy stop level orders now look like this:
Buy#3 = 204.00 (pending = 0.1+0.1) /actual lots executed = 0
Buy# 2 = 203.50 (pending = 0.1+0.1)/actual lots executed = 0
Buy # 1 = 203.00 (pending = 0.1) / Actual lots executed = 0.1
Our Sell stop level orders look like this...
Sell #1 = 202.00 (pending = 0) /actual lots executed = 0.2
Sell# 2 = 201.50 (pending = 0.2+0.2) /actual lots executed = 0
Sell # 3 = 201.00 (pending = 0.2+0.2) /actual lots executed = 0
Now, if price moves back up to 203.00, our pending buy stop at 203.00 would be triggered (Buy#1), and another pending order would be added to each of the two upper Buy stop levels and to each of our 3 pending sell stop levels...
Buy#3 = 204.00 (pending = 0.1+0.1+0.1) /actual lots executed = 0
Buy# 2 = 203.50 (pending = 0.1+0.1+0.1)/actual lots executed = 0
Buy # 1 = 203.00 (pending = 0) / Actual lots executed = 0.2
Our Sell stop level orders look like this...
Sell #1 = 202.00 (pending = 0.2) /actual lots executed = 0.2
Sell# 2 = 201.50 (pending = 0.2+0.2+0.2) /actual lots executed = 0
Sell # 3 = 201.00 (pending = 0.2+0.2+0.2) /actual lots executed = 0
If price continued to move up to our 2nd buy stop level and 203.50 was hit, then on the buy side, a pending order would ONLY be added to our upper most buy stop level (Buy#3) and not to the lower buy stop (Buy#1), and pending orders would also be added to all of our sell stop levels. Our trades would now look like this...
Buy#3 = 204.00 (pending = 0.1+0.1+0.1+0.1) /actual lots executed = 0
Buy# 2 = 203.50 (pending = 0)/actual lots executed = 0.3
Buy # 1 = 203.00 (pending = 0) / Actual lots executed = 0.2
Our Sell stop level orders look like this...
Sell #1 = 202.00 (pending = 0.2+0.2) /actual lots executed = 0.2
Sell# 2 = 201.50 (pending = 0.2+0.2+0.2+0.2) /actual lots executed = 0
Sell # 3 = 201.00 (pending = 0.2+0.2+0.2+0.2) /actual lots executed = 0
*Basically, the pending orders are accumulating (stacking up) if the price continues to whipsaw back and forth through the pending stop levels. Is this correct?
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**When sell stop orders are hit, then pending orders are only placed at sell stop levels BELOW the level that was actually hit, plus at all of the buy stop levels.
***When buy stop orders are hit, then pending orders are only placed at buy stop levels ABOVE the level that was actually hit, plus at all of the sell stop levels.
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Again, I may be completely wrong, but this is how I understand it. Please let me know if this is correct.
Regards,
CA26