Using Limit Orders

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Using Limit Orders

Last comment by - July 2018

Using Limit Orders

Newbie seeks help in using limit orders for algorithmic trading. Confused by examples found, needs basic explanation and code.

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Using Limit Orders

Oran Christian | August 2016

My latest project in learning to write algorithms is figuring out how to use limit orders. Simple enough I thought, just put the word "Limit" in front of the order line of code. When I ran a backtest, it ordered the specified quantity once every minute (Minute Resolution), until I ran out of money then gave me an insufficient funds run error. Oops - not as simple as I thought! Apparently, limit orders do not cancel themselves automatically when they fill. Is that correct?

My search for examples of shared code using limit orders has left me even more confused, so I am asking for help. Can someone please explain how to use these orders correctly? Start with the basics and assume that I know nothing - which is not a bad assumption :( If someone knows of some simple code somewhere that uses limit orders, a link would be appreciated. Thank you in advance to anyone willing to help out a constant newbie!

Author

Oran Christian

August 2016

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2 people upvoted this

Alexandre Catarino INVESTOR

QuantConnect | August 2016

Hi Oran,

Could you provide an algorithm that generates this behaviour so that I can debug it?

Upvote

Oran Christian INVESTOR

August 2016

Alexandre,

I don't know that I can, I have probably changed it 50 tiimes since that first failure. I would change something and it would fail, so I change something else and it would fail. I'm running out of ideas of what to change. Let me see if I can recreate the original flop and I'll share it so everyone can see what NOT to do :)

Oran

Upvote

Oran Christian INVESTOR

August 2016

OK, here was my original attempt that flopped big time. Don't laugh at the strategy, it was never intended to be do anything but enter a limit order at a price lower than where the stock was when it placed the order, sell at a profit, and enter a new limit order to buy again at the lower price and sell again if the profit exit was met. Looking at a 1 minute chart for SPY on 08/22/2016, it should have placed a limit order, bought, sold, bought again, sold again, and set out the day since the price never again fell to the buy point. Instead, it buys multiple times at crazy times until it runs out of money, sells as it should with the market order, then immediately starts on a buying frenzy again when the price is nowhere near $218.10.

In other words - this doesn't work anything like expected. So, I am a DA with no clue of what I'm doing :) I already knew that; that is why I am asking for help! I know there is a way to make limit orders work, it is just not as simple as I had hoped for. Surprise - it never is!

Upvote

Oran Christian INVESTOR

August 2016

After spending the day reading and working on this project, I am starting to think that limit orders require working with order tickets. Am I on the right path? The problem with that is that I don't know anything about that one either. So, I guess I am going to have to learn about tickets first, before I can tackle limit orders. Anybody out there willing to play Professor?

Upvote

Jared Broad INVESTOR

QuantConnect | August 2016

Hi Oran, please checkout the QCU example "How do I use Limit Orders?"

_limitOrder = LimitOrder(_symbol, quantity, (_price * 0.95m));

This saves the order ticket, which you can use to update or cancel the order later.

_limitOrder.Update(new UpdateOrderFields{LimitPrice = newLimitPrice});

You can check on the status of the order too:

if (_limitOrder.Status != OrderStatus.Filled)
{
    Plot("Limit Plot", "Limit", _limitOrder.Get(OrderField.LimitPrice));
}

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

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Guadiana INVESTOR

August 2016

Hi Oran,

OrderTickets are the object result from a LimitOrder, MarketOrder, etc.... from the OrderTicket, you can access its Status (Filled, canceled, etc...) and with it, you can also Update or Cancel orders (providing the ticket id).
Have a look in this thread about the OrderTickets feature:
https://www.quantconnect.com/forum/discussion/623/feature-ordertickets-and-updating-orders/p1

Upvote

Oran Christian INVESTOR

August 2016

Continuing the quest, I checked out (again) the QCU examples for "Using Limit Orders" and "Using Order Tickets" trying, as best my feeble brain could, to follow them. I thought I was getting there, so I updated my algo as attached. I get a run error in the backtest, and I can't figure out why. Obviously, I am not "there" yet. Can somebody shed some light on why this does not work? Pretty Please :) Thanks.

Upvote

Nicholas Stein INVESTOR

August 2016

Oran,
I have an algorithm which uses limit orders in which I worked out the flow of events. I am attaching the back test for the algorithm. The returns are pretty bad, but it compiles and runs the back test. I even ran a similar algorithm live for a while and it performed well insofar as the event handling is concerned.

Clone the algorithm and run a back test. Then download the code and put it into your Lean on your local machine. Then dive into the code and look at the way I handle the events and blocking of new orders until the existing order has resolved either through a complete fill or a cancel. It also handles partial fills gracefully as well.

Essentially here is the logic. Make limit order -> block further orders and wait for a fill -> if it has not filled after x number of bars, cancel whatever is left of the order and unblock further orders.

Nick

Upvote

Oran Christian INVESTOR

August 2016

Thanks Nick,

I cloned yours and will dig into it. That will take some time, your algo is a BUNCH more complex than mine. You are doing things I don't know about or understand so, like I said, it's going to take some time. That's okay though, I'll learn a few things along the way, and that's the name of the game!

In the meantime, since you are obviously way above me in coding skills, can you see where my simple algo blows up? It's bugging me why it doesn't work. Learning why something doesn't work is as important to me as learning how to do it right. Just stubborn I guess :)

Thanks again,

Oran

Upvote

Richard Hamilton INVESTOR

July 2018

Although I'm not a programmer, I've been slowly teaching myself by taking online courses and analyzing scripts posted by others.

Currently I'm working on the script posted above by Nicholas. I wanted to add three things: 1. Add the option to use EMA rather than SMA, 2. Allow for fixed number of shares and 3. Have the indicators use 15 min bars.

I believe that I resolved the EMA addition, although I ended up inserting

private bool UseEMA = true

in both the Main.cs and MultiSymbolStrategy.cs files. Ideally I would like to only have to declare the variable in one file if this is possible.

I was able to add code to use a fixed number of shares.

The main issue that I can't resolve is adding a 15 minute consolidator.After reading:

https://www.quantconnect.com/docs/algorithm-reference/consolidating-data#Consolidating-Data
and
https://www.quantconnect.com/forum/discussion/663/complex-indicators-on-15-minute-time-frame

I inserted 15 minute consolidation code into Main.cs but I'm stumped as to how to tie it into MultiSymbolStrategy.

I've tried a number of things, including
adding fifteenMinute to the priceIdentity variable,
using FastEMA in MultiSymbolStrategy
attaching the 15 minute event handler

But nothing I tried thus far worked. I've attached my code and should be greatful if someone could help me and either explain or show me what additional steps I need to take.

Thanks,
Richard

Upvote

Nathan Swenson INVESTOR

December 2020

Getting out of the Market early is more of a conservative move rather than aggressive such as going to war. I think the point of it is to take the least risk possible. The outer 1% of std deviation if a very high standard to meet, so I can understand why Peter made it that way. If you want multiple confirming signals, then you likely can't use 1% outliers.

The In and Out does very well with 3x leveraged funds because it is overly cautious, generally exiting the market too early, but safetly for the most part. So while you don't get all of the move, you could perhaps take greater risk for the shorter period you are in. The "jitter" from only 1 signal appears valid as the Out holding have done well, at least in the In sample data we've tested. That being said, it's difficult to watch this market zoom higher while sitting in Out holding since 10/6. In reality this is our first real "Out of Sample" data and it's not looking good so far but who knows what happens in the coming weeks. Everyone is predicting all time highs. We shall see.

Upvote

Goldie Yalamanchi INVESTOR

December 2020

Removing SHY from 2020 makes 2020 and possibly 2020+ trade normally and perform normally -- until such time as we can comment back in the SHY indicator.

If we are trying to "ace" the backtest then keeping SHY in always looks good until of course late 2020 when the algo stops trading in October.

But credit where credit is due... T Smith multiple signals (5 of 8) approach still did well with the Qual-Up universe approach from 2014-2018 as well. During those years by commenting out SHY in the original IN/OUT algo, the Qual-Up stocks didn't do well i.e. QQQ would have done well regardless during 2013-2018 because tech has been on a tear the whole past decard.

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Vladimir INVESTOR

December 2020

Here is updated DUAL MOMENTUM IN OUT v2.1

I have changed line 97 to:

prices = self.History(symbol, period + excl, Resolution.Daily).close

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2 people upvoted this

EllaHamilton INVESTOR

December 2020

Thx, nice one.

Upvote

Guy Fleury INVESTOR

December 2020

@Vladimir, I go with Nathan's explanation. The strategy goes to the sideline at the first sign of trouble. You do not want to wait for a consensus since you are already dealing with ETFs.

Trading QQQ is like trading a market average surrogate. It holds the same shares as the NASDAQ 100 index as everyone knows. The top ten holdings (AAPL, MSFT, AMZN, TSLA, FB, GOOGL, GOOG, NVDA, PYPL, ADBE) account for 55% of QQQ. It should be view as one of the easiest stock selection you can make. Playing QQQ tends to dampen overall volatility. While using TQQQ puts volatility back into play and at a higher level with an expected beta of 3.0x. Therefore, you are playing QQQ on steroids which evidently brings in higher risk. The reason for “extreme” caution even if there is a cost to it.

This is not a game where we will fix things after we lose. So, we should first play safe whatever the performance level we are at. We might need to compromise like playing this strategy at a higher level but with other strategies in order to reduce overall volatility and drawdowns, or only use part of the available capital (say 10 to 20% as if on riskier assets).

In my previous post, the point was made that you could drop some of the signal components (3 out of 4) and it would increase overall performance. Well, here is another point of interest: self.INI_WAIT_DAYS. I see its use as a way to reduce whipsaws around the moving average crossovers. The original code has it at 15 trading days. No one questioned this as it was a reasonable assumption since there are indeed a lot of whipsaws near those crossovers. Removing it, for instance, making self.INI_WAIT_DAYS = 0, dropped performance considerably and thereby justified its use.

In my version of the program, if you set it to zero, you get a 62.68% CAGR. If you keep it at 15, you have a 97.84% CAGR. If you set it to 10, you get about the same result (97.82%). However, if you set it below 5, something like 2 or 1, you improve the picture considerably. The economic reasoning is simple. The wait days operate on a high decay function: e^(-0,5t). It might also suggest that whipsaws fade away rather fast near the crossovers. Also, by reducing the wait days, you are increasing the number of days the strategy is fully invested.

The table below shows the evolution of the strategy where only the wait days are changed from 15 to 0. I think that the chart speaks for itself. Changing a single number in the program can have a tremendous long-term impact. Note that this is close to a 6000% improvement going from zero wait days to one. Nothing else in the program was changed for these tests.

Upvote

Vladimir INVESTOR

December 2020

Guy Fleury,

Looks like I saw a spreadsheet like above two months ago.
The only difference was Quantopian instead of Quantconnect.
But that not optimized strategy had a completely different decision-making structure:

-Consensus of individual signals.
-Far less degree of freedom.
-Three times fewer sources of information.
-Three times fewer variables.
-Static parameters.

Something like the one below.
In terms of total return, it exceeds the latest In_out_flex_v5 2020-12-16

BTW: What will be your decisions?

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2 people upvoted this

Frank Schikarski INVESTOR

December 2020

Hi there,

some comments regarding the trigger for in or out:

if (extreme[self.SIGNALS + self.PAIR_LIST]).any():

There are several "regime scouts" that watch out if they observe danger. The beauty of this algo is, that danger is beeing memorized for some days.
They indicate danger, if they observe something extremely unusual, which is less likely than "np.nanpercentile(mom, 1, axis=0)" = lower 1% percentile of the data.
If there are "self.lookback = 252" observations, this roughly translates into less than 2.52 observations, or: the current signal observation is the worst or the second worst within the time period. This is a bit digital = not smooth.
This leads to the algo beeing very sensitive to not only the 1% but also the 252 observations which should not be the case. So we need more observations and then we can improve both the 1% treshold and the number of "regime scouts" theat we want to use in our algo.
As these are only "regime scouts", which only trigger our real algo logic e.g. "long 100 largest companies on Nasdaq" or anything else, I don't consider tuning these more or less independent scouts as overfitting.

What if we would (a) keep calculating daily returns for our signals, but (b) do this for every hour with a rolling 24-hours window? This should result in 24 times more observations = increase our resolution, allowing to optimize the 1%, the lookback period and increase the "any" until we get some redundancy from our scouts. Keep exploring ;)...

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1 person upvoted this

Vladimir INVESTOR

December 2020

Here is the updated DUAL MOMENTUM IN OUT v2.2
-Based on In_out_flex_v5_try.
-Used exponential like smoothing on line 116-121
-Line 120 is commented out.

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2 people upvoted this

Guy Fleury INVESTOR

December 2020

@Vladimir, yes, as you say: "...the strategy had a completely different decision-making structure". You improved on that strategy design since... thanks.

Changing the number of wait days (self.INI_WAIT_DAYS) in the program is more like an administrative decision. The idea is not bad since we know there will be some whipsaws at crossover times. However, there was no need to wait more than one day or maybe two at the most.

It is not that surprising an observation. We want security, be decisive, and not be clobbered by added trading costs due to whipsaw after whipsaw for days after an exit, and yet, this says do wait but at most one day and probably no more.

Such a small decision with such an impact. You change a single number in the program from 0 to 1 and it increases performance by 5910%!

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BukavuTrader INVESTOR

Ntale Lukama | December 2020

@Vladimir, Do you have one like that for FOREX?

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Vladimir INVESTOR

December 2020

BukavuTrader,

Do you have one like that for FOREX?

Not yet, but you can try yourself.

Upvote

Guy Fleury INVESTOR

December 2020

Some added notes. This trading strategy has shown that it could go quite far depending on some of its parameter settings, ETF selection, trading logic, and initial capital. Using 10k, 100k or 1 million is an administrative decision. The program will do its job either way since it is scalable (but up to a limit). It is a simple bond switcher based on QQQ, but it has interesting properties.

The max drawdown and overall volatility will be the same with either capital options. All you will be changing is the ongoing bet size. This will barely change the price at which a trade is executed. But will change the traded quantity. Increasing the capital ten-fold will increase the bet size 10-fold, and in turn, increase profits (losses) 10-fold. However, going for 10 million as initial capital will tend to make the strategy unfeasible since you might end up trading 175,000,000 shares of TQQQ on practically a weekly basis which is more than the average daily volume. So, there are practical limits to the strategy which will need to be addressed.

With 100k you can push the strategy beyond 1 B and with 1 M you can pass the 10 B mark. Almost incredible. However, this is achieved by taking on more risk, using 3x-leveraged ETFs which are also leveraged at 1.4x. Thereby pushing on the machine way beyond what the original design was. Of note, changing the wait days (self.INI_WAIT_DAYS) to 1 had a tremendous impact on overall performance, a real game-changer, and yet, just another administrative decision.

I have not touched risk reduction procedures yet. This comes at a later stage in my testing process. It is expected that by installing protective measures the overall performance will be reduced to some extent. But, I will know that after those measures are added. Meanwhile, I have other tests to make.

My version of this program is dealing with a 3.x leveraged QQQ surrogate (TQQQ). It is playing an index tracker but with 3.x the average market beta saying it swings more than QQQ which is itself an average market consensus equivalent.

In pushing further, the strategy reaches a performance plateau from which it starts breaking down. It does not blow up mind you. It simply trades less and less and thereby generates less and less suggesting not to go that far. But that should be expected. Knowing that the strategy has seen its own built-in structural limits, it is almost time to apply protective measures and scale it down to a more acceptable risk/reward level.

Here is my take. You PLAY the game for its long-term CAGR potential. Which trading methods will give you the highest return within your own trading constraints? Not somebody else's, but your own. We need to answer the question: will we accept 5% more on a temporary max drawdown for 5% more in CAGR? The decision has value and is based on the initial stake:

10k ∙ (1+0.30)^20 - 10k ∙ (1+0.25)^20 = 1,033,135

100k ∙ (1+0.30)^20 - 100k ∙ (1+0.25)^20 = 10,331,346

1M ∙ (1+0.30)^20 - 1M ∙ (1+0.25)^20 = 103,313,464

This should weigh in the evaluation of your acceptable risk/reward scenario. It can be a costly decision.

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3 people upvoted this

Vladimir INVESTOR

December 2020

Here is the updated DUAL MOMENTUM IN OUT v2.3

Based on In_out_flex_v5_disambiguate_v2.

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1 person upvoted this

Simone Pantaleoni INVESTOR

LesFlex Quantitative Nerd | December 2020

Great idea Vladimir! I was working on a similar update on the INOUT algo, but you anticipated me! :P

Have you also tried to decrease further the "decay" value for the SELF.WAIT_DAYS variable, reducing the waiting to increase sharpe and return? (guess probably yes, isn't it?)

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Carsten INVESTOR

Carsten _ | December 2020

Vladimir as you requested.. :) was a bit trick, just happy to get it as a multi AlphaModel running. Its a super simplified version, but you can easily upgrade it. At the end it has much more lines than the normal version. It was quite trick to get the signal into the two AlphaModels. At the end I used ObjectStore. If someone has a simpler solution, with a global variable? please comment.

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Guy Fleury INVESTOR

December 2020

@Vladimir, I like the behavior and equity line of version 2.3. Remarkable, and great numbers. I will try to find some time to look at it since I think there are things I will learn in the process. Thanks for sharing.

Upvote

Damiano Bolzoni INVESTOR

December 2020

Guys, I really fell in love with this strategy (I actually started following the thread on Quantopian) and so ran some additional backtests taking into consideration several 5-year periods.

The strategy really shines during the 2008-2012 timeframe and then again in 2020. That's how it delivers 30% annual return. Take any other period of time and it will barely matches the returns of holding QQQ: I literally just finished a backtest between 1-1-2013 and 12-31-2019 and it's underperforming by nearly 10% overall.

If one substites QQQ and FDN with SP500 equivalents the same behavior can be observed, actually returns are even worse.

Am I the only one experiecing this?

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Simone Pantaleoni INVESTOR

LesFlex Quantitative Nerd | December 2020

Just tweeking the Waiting variable using a bigger decay, as suggested above to get slightly better returns and sharpe :)

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Carsten INVESTOR

Carsten _ | December 2020

Vladimir could you plese check again, should work now, the objektstore object was not created in the initialize, but it was yesterday on my disk as i was finding out how to impement it....

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Jack Pizza INVESTOR

Sum Sum | December 2020

FYI to make this more robust these same arguments were brought up in the old QT thread.

Not sure if this is implemented in this or not.

There should be a 3rd option or ultimate out where it just goes into cash or adding gold as a 3rd / 4th asset to rotate into.

Given at some point in time stocks and bonds might breakdown together.

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