Is There a Winner from all This BS?

There is abundance of claims that markets (by definition US markets) are rigged. Rigged in the sense that orders are often executed in a way, which contradicts to the natural intent of the person/machine behind the order. Until now, I have dismissed most of these as (populist) speculation, or, conspiracy theory. There is some truth in it however and my feeling is that it’s detrimental to all participants, yes, even to the “winner” in the examples I am going to show.

As most of the readers know, I trade futures, besides other things. My approach is to submit all my trades in a single shot to Interactive Brokers and be done for the day. Obviously, a good number of the orders are using stops and limits.

Two days ago, I was surprised that I entered a position in the Soybeans contract. Here is a chart:


Be the judge: do you see the spike at the high of the day? In the box we have the high – $890. Guess where I had my stop – yep, that’s right, at $890.

Two days later, different contract (Soybean Oil), same shit:

Soybean Oil

Do you see the very bottom of the day – yep, that’s where my stop was, at $30.70.

Now, to most of you Soybeans and Soybean Oil sound exotic, but these are decent size contract, trading between 50,000 to 100,000 a day lately. Keep in mind that a single contract (for the Soybeans) is close to $40,000. So, this is quite liquid market.

So we come to the point of this post – chances of this happening by chance – how about zero? To put it bluntly: This was a bullshit execution. Either the market making algorithm (these contracts are listed on ECBOT, so I assume electronic execution) is flawed, or, it has flaws which allow third-party players to take advantage of otherwise completely legit orders.

Moreover, no-one wins in the long run from this BS execution. I didn’t win, in fact, I already lost money on the Soybeans (compared to what I would have done if I didn’t get the bullshit execution), the jury is still out on the Soybean Oil – it depends how this trade would have developed.

The exchange cannot win from this BS. It’s putting off retail traders for sure, and I am skeptical even how many of the bigger players can avoid the BS.

Last but not least, if there was a speculator, or an algo, on the other side, who profited off me – guess what, he is going to run out of customers pretty quickly. The point is simple – ridiculous (unfair or “against the intent”) execution helps no one. Yet, it’s obviously there. Please convince me otherwise.

As for me, I am going to change my approach to ECBOT futures – no more limit/stop trades. I guess I will be trading less on this exchange, at least for a while. I am still going to continue trading the same way on other exchanges – I haven’t noticed similar issues with futures listed elsewhere, at least not to this degree. I am also going to follow up with my brokerage, about possible solutions, but any resolution is going to take time.


  1. Clinton says:

    Yes this is a problem with this style of trading. It is common knowledge that the market will target stop-losses/limit order and the like orders to take them out. Over the years i have the privilege to work with hedge funds, also advise on risk management, but also to work and talk with Market Makers, floor traders and Algo prop firms. Whilst not all agree, the general consensuses is only retail use stop-losses and everyone else never uses stop-losses. The idea is not to use stop loss and personally i never use stop-losses nor had to use stop-losses. I can show multiple examples of where the market has moved around highs/lows enough to take out the stops and the rally in the previous direction. All markets do this unfortunately as their is no hiding from computers. What is humorous is that Stop-losses are a big part of marketing trading software, programs, books etc “to manage risk”. It is all bullshit and most people that write that shit have never actually made substantial trades and/or done any amount of consistent ongoing trading. I have done a fair amount of work on this and build all my systems, process and strategies on not using stop-losses. When you think about it you really don’t need one. In fact, what i do is use this information and trade quite successfully based on the idea that market makers and algos will take out stop-losses. I hope that provides you something to work with and/or think about.

    1. quintuitive says:

      Thanks for this contribution. Another reason to use stop, and limit orders was to be able to balance between a full-time job and trading. 🙂

  2. tstoyc says:

    In the case of soybean oil, I think your stop was too tight. While it was correctly placed below the 2/9 low (30.73) a better stop would have been below the 1/9 low (30.68).

  3. tstoyc says:

    oops, make that 1/29, not 1/9

    1. quintuitive says:

      Sure, on what basis though? My stops are based off my entry point, and I simply re-set them every day.

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