How to Improve Your Fill Rate with Limit Orders

As a trader, it is important to understand some advanced tactics that can make or break a trade.  One method I advocate using is front running.  The way I use this term is a bit different from its standard meaning.  You will be surprised at how it can improve your bottom line for both entries and exits in any market.

What is front running?

The standard definition of front running describes how brokers and insiders positioned themselves unfairly using information from the traders they represent.  Before the regulatory agencies starting cracking down, front running was a widespread “pump and dump” scheme.

As individual retail traders, we front run trades by placing the profit target one tick “in front” of our goal.  This greatly improves the chance of getting filled.  Seems simple?  Yes, it is.  Surprisingly, many traders never front run trades using this method.

Here’s an example:

Let’s say you are long the market and you have a profit target of 1400 on the E-Mini S&P.  There may be 5,000 other traders waiting for the same price to enter on limit at 1400.  This could create  a problem because orders are processed on a first come, first served basis.  If you wanted that exact price (1400 limit), yes, you could achieve it, but not unless 1400 was penetrated to 1400.25!  This is why trading can be a rough game, but it doesn’t have to be.  When front running in this example, you would move the target to 1399.75 (effectively in front of 1400).

Click image to see it at full size

When you should front run trades?

Watch how the market reacts when approaching the price you want.  In the chart below using the ATO method, 1400.75 was attempted multiple times starting at 10:20.  When the market tries (unsuccessfully) to continue a trend or move showing multiple, consecutive failures, that’s an indication to move your target back by one tick to ensure a fill.  You can use the same scenario for entries, which would have guaranteed an ATO entry in this same example.  Always look for bar effect as proof.  This tip will allow you to exit or enter a trade when the writing is on the wall.  Also, Front running is not always necessary – it works great for slow markets.

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