How to Trade System X

This page describes the steps that you will need to follow on a daily basis to trade System X:

• Check for new orders
• Cancel existing orders
• Adjust existing orders

On some days you will need to take action in all of the above steps whereas on other days you won’t need to do anything.  This will depend on the prevailing market conditions.

With System X you will place far more orders than are actually executed.  This is because System X uses limit buy orders placed below the current market price to open new positons. This is a characteristic of mean reversion trading.

The descriptions below assume that you have read and understood the Understanding the View My Trading Systems

Check for new orders

The first thing to do is to look in the new orders table for new trades.

In the table below, before the market opens on Thursday 1st March 2007 you would have needed to place a Day Only (DO) limit order to buy (in this case)  PMN at $6.89 with a Good Till Cancelled (GTC) if done stop order linked to it to sell PMN at $5.94.  This means that if the market was to trade down to $6.89 the limit order would be executed and the sell stop order would automatically be entered into the market.  If the market didn’t trade down to $6.89 then the stop order would not be placed into the market. 

The limit order has a dark green highlight in the Order Purpose column and says ‘Enter Trade’.  The stop order has a pink highlight and has ‘Fixed Stop Loss’ in the Order Purpose column.

You also need to check the open orders table for profit targets for newly opened trades (trades that opened the previous day).  These will be highlighted in light green and have ‘Profit Target’ in the Order Purpose column.  The Profit Target orders will be linked OCO to a stop order that will already be active in the market.  The stop order would have automatically been placed when the position was opened because it would have been linked to the limit order that opened the trade. 

For example, in the above new orders table is a Profit Target order for an open BEN position.  The position was entered on 28th February 2007(these details are presented in the open trades table).  When the limit order to enter the trade was executed, the linked stop order was automatically placed.  The new Profit Target order needs to be linked OCO (One Cancels the Other) to the existing Fixed Stop Loss.  The new order will be to sell BEN at $14.11 linked OCO to the stop order to sell  BEN at $11.86.  This means if the market goes up and hits $14.11 then the limit order will be executed and the stop order will be cancelled.  Alternatively, if the market goes down to $11.86  then the stop order will be executed and the limit order will be cancelled.

Cancel existing orders

You will need to check the orders in the ‘cancel existing orders’ table to see if there are any active orders that you have that need to be cancelled.  If you have been using Day Only (DO) orders and linking them correctly (OCO and if done) then all of the orders listed in the table should have been automatically removed from the market for you by your CFD provider.  Note: different CFD providers deal with DO differently so you should consult your provider to ensure you understand how they deal with them.

The table below shows the list of orders that need to be cancelled before the market open on Thursday 1st March 2007. 

Adjust existing orders

The next step in the process is to adjust any existing orders.  The table below shows the list of orders that needed to be adjusted before the market open on Friday 2nd March 2007.  In this case, all of the orders are profit targets but from time to time there will also be fixed stop loss orders to be adjusted.  You won’t need to adjust all of your orders everyday.  You need to understand how your CFD provider deals with your orders because some providers won’t let you adjust an order.  In this case you will need to cancel the order and place a new one.  You will need to make sure that the linked orders are still linked appropriately in this case.

System X will also inform you of active orders that are in the market that do not require adjustment (these will be the Fixed Stop Loss orders on open positions).

 Open trades

The open trades table details all current open positions.  In  the status column you will see the comment 'Hold' and then all the pertinent details relating to that position.  This enables you to check your order status is correct and in line with the current trading positions.