Hacker News Reader

Hacker News

Comment by wtf_is_up | Hacker News Reader

Parent Full thread

wtf_is_up

How is this possible when I use limit orders? (not a robinhood user btw, but pretend I am)

View on HN

If, by the time your order reaches the book, there is a better price than your limit, you are entitled to it.

That is the best execution obligations of your broker.

In RH case, their intermediary bought at the better price and resold it to you at your ask, keeping the difference.

from screenshots I have seen lately, I'd bet that at least 20% of RH users have no idea what a limit order is.

The general recommendation is never use limit orders - do not reveal your intention to the other side.

This is terrible advice. if your slippage risk is such that you aren’t protected by NBBO you have absolutely no business on a retail broker of any sort. Meanwhile limit orders minimizes the most likely risk a retail trader has to overcome. Either you don’t understand the advice you were given, you were duped or you are trying to be duplicitous.

In any case, terrible advice to be repeating in the context of retail trades.

I don’t give any advice. I was probing to see the reaction . It is amusing to look at postings glorifying the pundits advice. They are not your friend.

Have you actually placed a limit orders? Do you practice this advice with your own $’s? Do you know how much taxes you pay for a trade considered day trading? If the limit order is executed same day it is considered day trading. What is the point then?

Why retail investors are penalted for that but hedge funds are not? Are you retail trader or on the other side of the table? If so why you are giving advice to retail investors? The motivations? When I used to follow the pundits “advice” they were always wrong - limited orders were immediately executed. These “fluctuations “ causing execution of limit orders are never reported in the historical data . I used to purchase historical data for thousand $’s and never found these fluctuations in the official dat I saw on the screen. Meaning you can never rely on historical data for analysis. If you had the same experience you would know. Learning from practice I’ve different way of making $’s.

I spent years writing HFT trading systems. I’ve built back testing systems that actually worked. I’ve been out of the industry for more than five years and every order I’ve sent since I left (all through retail brokers including RH) have been limit orders.

I’m going to guess that I’ve spent more time in front of a real market feed than you trying to divine how the orders are impacting the book but who knows.

All that said I’d love to subscribe to your newsletter and learn the secrets to why limit orders have a different tax treatment than market orders.

Also for the record market orders tell the market you have no price sensitivity. If your newsletter could tell me how that’s better for retail investors I’d appreciate it.

Got it , just an observer working for the establishment. Why you didn’t invest your own $’s if your algo is so good? Other peoples’ money I know. Is that a real job? HFT is a scam. What about naked short selling (hft by other name )? Making money out of thin air? Selling something you don’t own? You did the hft for that too? What about GME now? 1.8 million missing shares . What your algos will do to the market? Crashing it?

Now the hedge funds are a joke, no? They aren't buying 50 million shares at 30c, nor $100, nor $300, and that's their problem. You can do hft all in nanoseconds - nothing is helping them. PRICE DOESN'T MATTER

How hft algo is helping the hedge funds now? The market will be never be the same , no hft , no newsletters , no apps will save it .

And this isn't a financial advice.

I've seen recommendations to never use market orders; I've never seen one against limit orders.

Just try with your own $ and you will learn from practice. Good luck following recommendations. Practice is the best teacher. Now - do you have thousands $’s to learn from your mistakes?

Say the national best bid and offer (NBBO) is: Bid: $10.45 Ask: $10.55

You place a limit buy order at $10.55 for 100 shares.

$0 commission broker that sells order flow: Your order is routed to the market maker buying your broker's order flow. They sell you the 100 shares for $10.55 since it's within your limit and within the NBBO spread.

$5 commission broker: Your broker attempts to price improve by searching multiple liquidity sources and gets a hit at the NBBO midpoint: $10.50.

In both cases you paid $5 for the trade.

This is not at all how NBBO works. Effectively all retail brokers sell order flow and if they dont they still dont have any obligation to improve your price beyond NBBO.

> This is not at all how NBBO works

Open to corrections

> they still dont have any obligation to improve your price beyond NBBO

But those that do price improvement use it as a marketing differentiator:

https://www.fidelity.com/learning-center/tools-demos/trading...

https://investor.vanguard.com/investing/online-trading/order...

https://www.schwab.com/execution-quality

https://www.tdameritrade.com/tools-and-platforms/order-execu...

https://www1.interactivebrokers.com/en/index.php?f=47202#bes...

Schwab, Fidelity, TD Ameritrade & IB all engage in PFOF. They all have free offerings.

Here is what robinhood advertises for their price improvement https://robinhood.com/us/en/about-us/our-execution-quality/

All NBBO improvement requires is that if you send an order through the book you’ll get the best price on NBBO. Even when Robinhood got fined it wasn’t for that, it was for promising better than their competitors and then putting it in writing that they were happy being worse than their competitors.

> Open to corrections

Under the "Robinhood" header of this Matt Levine column is a pretty good explanation of payment for order flow:

https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...

Reply on news.ycombinator.com