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MIT orders are acceptable but not always efficient

аThey are good for trading within a support/resistance channel, but they will cost you ticks.

ж OCO orders, where accepted, are very helpful. They will help you bracket the market with different strategies and should be used wherever needed.

ж Specify first open only. Some New York markets have staggered openings. In these markets each contract month is opened individually in chronological order, traded for a few minutes, and then closed so that another month may be opened. Once the process has been completed, all months are opened again at the same time. The same procedure is used for closing. Should you need to get into one of these markets on the open, specify that you want your order good for the first open only. All too often the second opening price is distinctly different from the first open. This can cost you money.

ж Insist on prompt reporting of order fills. It is absolutely necessary for you to know when you've been filled and when you've not been filled. You must be strict with your broker in demanding fills back as soon as possible. Do not accept excuses, particularly in currencies, T-bonds, S&P futures, and petroleum futures, where flash fills are easily given. A flash fill is one for which you may remain on hold as your order is hand-signaled to the pit. Although there will be some conditions in which delays are understandable, such delays are anathema to the day trader and must be avoided whenever and wherever possible.

ж Know which exchanges will accept certain orders. The rules change from time to time and from one market condition to another. If you don't know the rules, find them out. The Chicago Mercantile and IMM will accept almost all orders almost all the time. The Chicago Board of Trade is a stickler for accepting only certain types of orders - it does not accept MITs. Some New York markets have restrictions as well. Orange juice is one of the most notorious markets, but then you probably don't want to and shouldn't day trade OJ.

ж Find out how your broker places your orders. Does he or she call the floor? Are your orders put on a wire for execution? Does your broker need to call someone, who will call someone else, who will then call someone else? This all takes time. Day traders can't afford the time for such delays. Ask your broker for his or her procedures and deal only with those brokers who can gel you the fastest fills. Anything else will cost you money no matter how low the commission rate. Don't be penny-wise and pound-foolish.

ж Globex (24-hour) trading requires even more discretion in order placement. Be very careful. Learn the rules and learn to deal with the lack of liquidity.

ж If trading futures options, use price orders all the time. A market order in options will frequently bring you shockingly bad results due to the poor liquidity. Always use price orders in futures options!

ж Learn how to place orders. Make sure your terminology is correct, make certain you mean what you say, and make sure you listen to the order as it is repeated back to you. You are liable for your orders. Errors will cost you.

ж Don't beat around the bush. When you place your orders, speak quickly, decisively, and clearly.

ж Keep a written record of your orders. Even if you trade only one market, once a day, keep a written record that includes the market, whether you bought or sold, the type of order, the quantity, the price at which you were filled, your order number (as given to you by the order taker), and the time you placed the order. Don't fail to note all the above. It will save you a great deal of money in the long run.

ж Report all errors immediately. The longer you wait to report an error, the smaller the odds of having it rectified.

ж Always check out at the end of the day, especially if you have traded a great deal. By check out I mean make certain you have received all your fills and that you have closed out all your trades. Many brokerage firms will send you a preliminary run at the end of the day via modem. Print out the run and check it against your order sheet. Report all errors immediately!

ж Check your order sheet before market closing to make certain you have taken the necessary steps to close out positions. The more you trade and the larger your positions, the more important this will be.

These are just a few suggestions that will help you master the pragmatic end-of-day trading. Don't ever discount the importance of proper order placement and consistent procedures. The wrong order in the wrong market can cost you plenty. I know. I've made all these mistakes at one time or another, and I don't want you to have to repeat them. Learn it from me the easy way - don't learn it the hard way by losing money.

Summary

Too many traders are either ignorant of, or uninformed about, the importance of orders. The day trader must make the most of each trade. Therefore, saving a tick here and a tick there can eventually add up to a considerable sum of money. Although the day trader will most often use market orders, there are numerous situations in which other types of orders are either preferable or dictated by the nature of the system that is being used. This chapter defined the various types of orders, indicating when they are best used and under what conditions certain orders might be better or worse than others.