round lots, less than 100 shares, and chart prices

JHuber8383

I recently had a stop loss order for $80 on a trade of less than 100 shares. I was stopped out at a price of $79.25. The low that day on stockcharts.com charts was $79.50. I called my broker (Fidelity) for an explanation and was told that the high-low prices one sees on a chart are only for round lots ( 100 shares or more). Is this correct? If so, how do you avoid getting a lower price when you have a stop loss order in for less than 100 shares on a trade.

JHuber8383

as no one has answered my question so far I have done some more research and thinking about this problem. The trade I was referring to was an etf trade. I only trade etfs. In fact I had another odd lot (less than 100 shares) buy stop loss etf trade recently where the stop was at $20, the high that day was at 20.25 and my purchase price was 20.50.

It is correct that the prices one sees on a chart are only for round lot (100 shares or mulitples of 100) trades. The charts do not reflect the price of odd lot trades.

It appears that for round lots the market maker must sell you the etf at the next "tick" up if you are buying, and he must buy from you at the next "tick" down if you are selling. However for odd lots he is under no obligation to sell or buy at the next "tick", and if a "tick" for this etf is 2 cents he can raise or lower it to 25 cents or whatever he wants.

in all my readings on trading I don't remember anything being mentioned about this problem. Is this something no one likes to talk about?

there is a solution to the problem and that is instead of using a buy stop loss order to buy at a certain price above the current close one uses a buy stop limit order, and instead of using a sell stop loss to sell at a certain price below the current close one uses a sell stop limit order. The only problem with this is that the trade may not execute if the price e3xceeds the limit.

markd

This is only hearsay, not fact, but I understand that some brokers will fill small orders from their own inventory on very liquid stocks and not actually go out to the market to find a matching trade. The extra nick is just gravy. Or, you could consider it compensation for carrying inventory to fill odd lot orders. No idea if that applies to etfs as well. But if that is true, it seems to me a limit order might get executed because the broker would be passing up a commission if they don't fill the order. But possibly there would have to be a market trade right at your limit price before they could do that. Just a thought.

Kevo

If your trade was the low of the day, then that daily bar should show your execution price as the low for that day. Will you please check to see if that bar got updated?

JHuber8383

I checked and the low was $79.50

JHuber8383

Here is another example that you can check out yourself. On 11/24/2014 I had a stop loss for 40.85 on the ENZL etf. I had 73 shares to trade. The low that day which you can check out yourself on the sharpcharts of Stockcharts .com was 40.43. I received 40.27 for my shares.
The trading desk at Fidelity looked into this matter for me and reported that the highs and lows one sees on a chart are only for round lots or multiples of round lots (100 share trades).
What is going on here?

Kannafoot

It's entirely possible you're seeing Intermarket Sweeps. I've been hit by those a few times myself on highly volatile stocks. An Intermarket Sweep does not appear in the NBBO, nor does it appear in the daily high/low.

Here's one description that uses a buy order as an example. The same would be true for stops, though, and that's where I've been hit by them.

http://ibkb.interactivebrokers.com/node/1734

JHuber8383

I had another episode with a buy stop loss for the etf ZROZ where the price I was sold the etf was 15 cents above the high that day and my stop was well below the high that day. This is the reply from Fidelitys active trader desk. " The trade was a correct fill however because it was an odd lot trade it does not reflect in the day high and low that shows in the quote box." DThhis is from Scott Tye at premium services group in Fidelity Brokerage services.
I don't think this falls into the category of an intermarket sweep as reported by Kannafoot.

markd

Well, the current high - low spread is 66 cents and the bid ask spread is 45 cents, and it is very thinly traded, so maybe it's not so surprising?

markd

Here's a screen shot of the 2 day 5min chart (ignore the indicator windows):



You can see how there might be some distance between the stop and the execution. That's not to say that the broker might not be taking advantage of the situation. It doesn't really look volatile on the daily chart. Maybe you don't really need a stop? As an ETF it's really more of a vehicle for intermediate to long term investing rather than trading (especially with those gaps in price and time!) so maybe a mental stop would be better here?

markd

Here's ENZL for 11/21,24. Similar situation.

Kevo

I don't think Intermarket Sweeps apply to this topic either since Intermarket Sweeps are for large limit orders. This post is regarding odd lots, which is less than 100 shares.

When I first saw this post, I found it hard to believe that a Retail trade would not be recorded onto the public tape that gets reported to the exchanges for volume/high/low purposes etc.

Being the curious type, here is what I found:
Beginning December 9, 2013, odd lot transactions in all NMS stocks are now reported to the public tape. Here is the link to the SEC source article: Odd Lot Rates in a Post-Transparency World.

This answers your original question regarding odd lot trades not reflecting on the chart if the trade happens to be the low or high for the day. Odd lot trades are reflected in daily bars of a security including ETPs.

Here is another question you asked: "If so, how do you avoid getting a lower price when you have a stop loss order in for less than 100 shares on a trade."
Stop-Loss Orders turn into a market order. The stop price can be greatly different than the execution price. The solution would be to trade ETFs that are more liquid.

Again, charts do reflect odd lot trades. Tick data is converted to bar data. You will not be able to "see" your odd lot trade in bar data.

You mention "buy stop loss". This is for covering shorts, or options trading. If you are doing these advanced activities, you will need more training to be sure you understand what you are doing.

There must be something that you are missing or not realizing. You will have to figure it out. For example, odd lot trades have historically been known for higher transaction and processing fees. These fees are built into your trade. They may not be a separate transaction. So the "execution price" that you see already has the transaction and processing fees taken out. Check with your broker to see if that is the case. What you think is the execution price is really the price after your broker has taken out fees. If you are getting higher fees for odd lot trades, consider switching to rounded lots.

If you continue to have problems, you will have to take corrective actions. Try something like scheduling a visit with a Fidelity branch to get help, taking more online trading training courses, and calling your brokerage support line. Do more paper trading to be sure that you have correctly learned something.

markd

Hi Kevo,

great research. I think the cited article is a little ambiguous about whether JH would actually be able to see this price. The footnote (2) to the sentence where it says the information is publicly available says this:

[2] These individual exchange feeds are typically used by only the most sophisticated of market participants such as market makers and high-frequency traders. Most institutional investors, retail investors, and academics, generally do not consume this data.

So does this mean re-sellers of data like SC would publish the odd lot prices or not? Not really clear.

Kevo

After looking closely, my understanding is that footnote 2 is regarding proprietary direct feeds. These proprietary direct feeds reported odd lot trades prior to December 9, 2013. The foot note seems to suggest that some of these direct feeds are "individual" where these individual direct feeds are only available to sophisticated market participants or high-frequency traders. Other proprietary direct feeds that were publicly available prior to December 9, 2013 may have been used by retail investors where odd lot trades were reported. It had to be a "publicly available proprietary direct feed" for odd lot trades to have been reported prior to December 9, 2013.

I have noticed that there seems to be more than one way to interpret footnote 2.

Regardless, after December 9, 2013, all odd lot trades are recorded onto the tape.

Bar data does not have Time and Sales or Tick data in it.

JHuber8383

I would like to thank all of you for your thoughts and comments. From what I understand you are saying is that the odd lot trades can be reflected in the price bars of the highs and lows on the daily chart but may not be reflected in the "quotes" for the days high and low. Only round lots will be reflected in the quotes.
I only trade etfs and I think I have solved the problem of getting poor price execution on etf trades. I ran a scan for all etfs which have an average daily volume of 100,000 shares traded per day or more over a 12 week period From these candidates I excluded all inverse and leveraged etfs, all precious metal etfs, and all individual commodity based futures etfs except the oils, and all volatility etfs. I placed the remaining candidates into a "Master ETF Chartlist" that I use as the group for my trading scans.
I checked the daily trading volume on all the odd lot trades that had poor price execution and they were all less than 100,000 shares traded per day. My odd lot trades whose daily trading volume was greater than 100,000 shares a day had acceptable price execution.

Kevo

JHuber8383: I think what you did is a significant improvement - limiting your ETF trades to those that have high liquidity, meaning daily trading volume of 100,000 shares or higher.

The daily Bid/Ask spread on this subset of ETFs should be much smaller. With higher liquidity, you are more likely to get a good price on a market order, and limit (or market) orders will get executed in a timely fashion. There are more buyers and sellers available on the other side of your trade. Your stops will be on target too.

I think quotes should reflect correct daily highs and lows too - as they occur, and as soon as market centers synchronize with the exchanges.

Kevo

With higher liquidity, Technical Analysis and technical metrics like Trend, Momentum, Overbought/Oversold, Support/Resistance, and Accumulation/Distribution will work much better too because the more people and activity, then the higher chances more will see the same thing and drown out the odd reasons for trades. Also, there is less chance of manipulation.

Kevo

Just a small update...

Here is a quote found on the Fidelity website:

"Stop Loss and Stop Limit orders are triggered by a round lot transaction of 100 shares or greater or a print in the security."

I interpret this to mean that just Stop Loss orders are triggered on a Round Lot transaction as opposed to triggering on an Odd Lot transaction. Odd Lots are reported to the public tape since December 2013.

(*) UPDATE:
Stop Loss now triggers on the last sale price, not the bid price.

ray1223

Stop limit works at Fidelity. I usually use this when I want to sell a stock. Always use it when it's an odd lot.

There are sometimes that it may not trigger because the price fell quickly (below limit price).

I use different levels for the limit price depending on the price of the stock.

For a stock that is $20. I put in a stop price of 19.75 with a price limit of 19.73

For a $100 stock I will usually use 10-20 cent less for limit price.

I may adjust my price limit depending on bid/ask differences.

Sofearnot

"You will not be able to "see" your odd lot trade in bar data."

No no no. This is not an 'etf' problem. Charles Schwab routinely fills at prices that the Stock never traded at.

It doesn't show up in 'Quotes' It doesn't show-up in "bars"

It is just Charles Schwab filling out of their own Inventory and trying to sneak one past you, and, no, they never report the sale

Sofearnot

This is Eerily familiar to those of you who know that Kraken 'takes out the Stops' on Crypto Trades. A very common Occurrence apparently. They are Keen to do this, according to everyone I know who uses them, and they Never report the Transaction.

Sofearnot

I looked, and the fills Given by mr. Charles Schwab were never reported, either in the Quotes - or - the bar. Neither. And, they are not reporting it to the SEC either. So we can conclude that brokers do this, whenever they think they can get away with this practice.