Phantom has always been anxious to address what the traders questioned in trading. It was with
great hesitation that the subjects of order placement and fill prices were finally addressed. He felt
more research on his part was necessary. There are so many different situations for traders when
they put in orders for their trading.
Some of the questions appeared over the months on the Trader’s forum. Many traders would get
what they felt were bad fills for one reason or another. Phantom knew it was mostly
misunderstanding of how a market works in volatile situations. This lack of understanding due to
little known knowledge on the subject disturbed him in these situations.
It seems there is a vast opinion by most traders that the brokers are to blame on most of their bad
fills. This misunderstanding is a great handicap to traders unless they are aware of what causes bad
fills in volatile markets. We shall present some of those situations with the explanation in order to
improve order placement by traders.
Little research is done individually by most traders and Phantom felt this is a big mistake. Phantom
has always done his own trace of order placement, execution and reporting of orders to and from
brokers in order to know the integrity of his placement. It gives him the ability to know what the
edge can or can not be upon an order placement.
Logging and tracing placed orders early in a trader’s career affords the opportunity of knowing just
how exact an order must be placed. An order placement for market orders, price orders, and stop
orders will have different urgency and slippage at various times due to current volatility at
execution. Understanding changes in volatility is critical in knowing when and how to place each
type of order.
I asked Phantom to give some insight on order placement before we got into particular experiences
and results of traders. His insight is based on experience and knowledge of his many orders in his
career. Phantom is the only trader I know to have been stopped out limit up and limit down in the
same day. It was early in his career and he takes full blame for not knowing early in his career the
situations, which can cause such slippage and fills.
Some of the important points on order placement and price fills are seldom talked about or
considered. Phantom felt many misconceptions were important to address as well.
ART SIMPSON (ALS): Can you tell us some of the most important insight you have observed in
your trading career on order placement and market prices.
PHANTOM OF THE PITS (POP): Let’s just start with a normal day and look at an opening, daily
range and closing. Regardless of what your order is to be, you will find that there are times during a
day that liquidity will be better than at other times. That is really the reason for different ranges
I remember in the early 70’s watching a trader bid the high of the day consistently at each new high.
I asked that trader why he would buy the high of the day. His answer was that there would be many
highs during a day but at the end of a day only one true high of the day.
If you think about that answer you’ll realize that it is true. Each time you buy a high, it is possible
that there will sooner or later be another new high for the day. To use his method of buying new
highs you would have to be a floor trader in order to use my rules but it has merits.
A reason I say it has merit is because the thin part of markets is at highs and lows. You’ll see this if
you look back on volume at the end of the day. When the markets are thin, they can be pushed
further until liquidity once again enters the markets. Even though markets are thin at the high and
low of a day, during the day there will be many new highs or lows which are not the high or low
showing at the end of the day. We can never know for sure which high or low during the day is the
true high or low for that day.
I got a kick out of some posts on a forum as one was headlined something to the effect that the
locals were gunning for the stops. There are some misconceptions in that thought. Locals don’t gun
for stops it is just how they trade. If you knew the market was thin at highs and lows and were
positioned the wrong way, What would you do if you were a floor trader? It is the traders who are
wrong which push the stops before the stops are hit. In other words you don’t want to have to buy
many ticks higher if you are wrong and approaching the high of the day. That is what the public
tends to do by putting their stops above the high for the day.
I certainly don’t think the forum participants were wrong in their thinking but only having fun with
the way the markets tend to act on their positions at times. They have really hit the nail on the head
and it just takes some understanding as to why it seems to be that the locals are gunning for the
stops. Locals are good at taking the smallest loss possible and going with the flow. It is an
advantage over the public traders.
To understand why markets act as a system which tends to prove the most people wrong in any one
day is a good start in correcting bad entries when trading. Traders are correct in thinking that the
stops will get them out and then the market will just turn around and go the way they had thought
previous to being stopped out. The fact that it happens is reason enough to devise your trading plan
accordingly. This idea is especially useful upon planning entries.
I never really liked stops but trading off floor creates a problem for the public because they
certainly need protection from being hurt from extreme moves. Stops do not protect well in choppy
markets. Trading plans can be improved by knowing how stops work and what far too often
If I get my signals of what I want to do, often I can see a new high for the day in the last hour of the
day. If I have my signals telling me to sell, it often times will say to sell the new high in the last
hour with the requirement of proving that position correct being that the market must spend little
time at or above that new high. This is not saying to take a loss on a stop but saying that the new
high is a move created by day traders, locals getting out or bad buying creating the stop run toward
the end of the trade day. For the position to be proven correct, the market must prove that the reason
for the new high is just as I previously described.
Markets slip through stops on the bottom toward the end of the trading day also because of the day
traders, locals and bad selling that push the stops which build up below the markets. This is natural
in trading and is not recognized often enough by traders, especially new traders.
Another big disadvantage of stops as I see them is the feeling by traders that they are protected from
adverse moves. When the market is liquid stops work fairly well. To often when an important report
comes out like the monthly unemployment report, markets such as bonds and currencies will do the
long jump. There is no liquidity for sometimes as much as several support or resistance points. This
means huge losses in a matter of minutes until the stop order can be executed.
Keep in mind a stop order is a market order whenever the price is hit. Most traders blame the broker
for not getting the stop order filled at the stop price. How can they if the market has no bid at your
sell stop price? How is the broker to fill your order on a stop when every order he has is the same
stop order price and there are no traders or orders willing to take the other side? Everyone sees the
same chart. Stops are grouped in the same place.
After a big report, the stops are free game for anyone who wants to squeeze as much profit as they
can. If I am correct, I know that it will often take three waves of effort before I have to worry about
the market reversing and taking my profit back. Why shouldn’t I bid the lowest price possible after a
report my way? If the market didn’t fall substantial on a big report I would be adding to my position
until I see the bad selling. The bad selling is the stop selling after a report. Same on bad buying as
the bad buying will be the stops buying at the market.
By understanding the drawbacks of stops you can come up with a better suited trading plan to
protect yourself. Rule one does just that. Your criteria must include getting out if you don’t want a
flip of the coin at times. Big reports are those times.
Another aspect of getting your order filled way out here is when you go at the market on the open.
Order fills look bad to some traders just by the way some of the quotes get reported. Some quote
machines show the open price the price, which was the night trading open price. The next day the
open may not be anywhere close to the night trading open.
Many trade systems signal a position to take after the previous days close is used as data in the
program and position on the open. This alone can skew the opening price by good margins of price
difference. If you are buying and you are on one side of the pit, you may get a good fill but a large
order may bid above your order in another part of the pit. The broker’s job is to buy the offer when
it is a market order on the open. They don’t have time to look for the cheapest price when there are
numbers to do. They take what is offered.
If you wanted to buy a computer and you did, you bought at the offer price. Why didn’t you wait six
months until the price was half as much? It is because you wanted it now! It is the same in trading.
Your market order on the open is saying that you want it bought now. Not after it went down or
went limit up or tomorrow after a sell off.
Just because the opening call was four cents lower and you put a market order in on the opening are
you going to get the low of the day. You might get the high of the day but most likely never the low.
You may even be filled five to ten cents higher on the day if news changes quickly enough. Or in
Orange Juice, you might have no sellers at all on the open for several minutes.
Orders are entered poorly more due to lack of understanding of how the market works at certain
times in getting orders filled. It is seldom because of a mistake on the order placement by the broker
or executing broker that you got filled way over there.
Another misconception of being filled in left field on an order is that the thought is that the broker is
trading for himself. I watch this myself and can attest that what I see has never been beyond
providing liquidity by a broker in poorly liquid times. Brokers are position traders. They can not
attend to being day traders or scalpers. It is their primary job to fill your order first. The brokers I
have seen do just that! They fill your order first.
One more aspect of being filled at what looks like a huge slippage is the delay in quote prices and
the delay in getting your brokerage runner to get the order into the pit in timely manner. They are
allowed a certain amount of time in getting your orders into the pit as it takes time to go to the desk,
take the order to the pit and hand it to the broker who is filling other orders already. Repeat the
process again as the runner looks for your order in order to report your fill price back to you.
Sometimes you don’t know that you were filled because the runner can’t find the filled order before
he has to run another order to the pit. Let me give some insight on this situation. If you must know
if your were filled, CANCEL the order! This way the runner must require the broker to pull the
order from the deck. If it was indeed filled it won’t be there and the runner will have to look for it.
Sometimes new runners don’t know to look over in that pile for the filled order. Every runner starts
a new career and is not good at it until experience becomes the teacher.
There are times when runners are seeing so much volume that the floor managers will tell them to
do the most important aspect of their customer business. That is getting the orders into the pits and
worrying about the fills later.
Often confidence in the way orders are routed and filled by customers and a new trader is never
above a one on a ten scale. You owe it to yourself to see the flow of orders and understand the strict
method, which must and is followed by the commission houses and the brokers. Believe me
integrity is as good as it has ever been.
I remember when beans had gone above 4.44 for the first time in history and I fed orders to the
floor to sell out my longs as they hit 4.44. My fill was at 4.32. I did my research and checked all
time and sales and price quotes that day. I know when I get a bad fill why today and everyday. It
has never been because of the broker not being alert. It has always been because I was not in the pit
and did not know what was going on for anywhere from two to ten minutes before my order was
Art, I know we want feedback on this so we can address the input from the Futures Talk forum. I
never really had my heart into this chapter as it seems so cut and dry for me but I know it is
important to the traders. They must understand their fate when blame is quicker than answers in
difficult market times.
ALS: Ok traders, Phantoms, paper traders, brokers, newcomers and us old folks alike, let us have it!
Your questions and observations please!
Note: We had some good feedback from R.H. and it seems fitting to put it in this writing. Below are
Phantom… thanks for another insightful chapter. Unless you’ve been there or had much experience,
you tend to follow the notion that the little guy always gets the short end of the stick. This chapter
explains the process of the markets for better understanding.
No specific comments other than paraphrasing my understanding of your words.
On tracing orders, is there other info or stats that one can request other than time and sales and price?
On “gunning for stops” it’s my paradigm and others that running the stops creates a quick bounce
and once hit and expanded, the locals offset and is done as a tactic in itself. Your explanation
seemed to be that it was not necessarily a concentrated effort to run the stops but rather floor traders
positioned wrong and as they offset near the thin areas, the market pushes thru the stops.
On markets proving most people wrong and hitting their stop and heading in the way they had
thought. Rule 1 was made for this action. If you position and the market goes against you, rule 1
offsets the position allowing for re-entry (in the last hour, in this instance) rather than positioning
once with a stop just beyond the daily extreme. So rule 1 allows us to use these areas to re-enter
again or enter (i.e.. day & 1/2) rather than lose the position and see it go our way shortly afterward.
On stops and a big report. Any other ways to see the bad buying or selling other than the looking at
the same chart everyone else looks at?
Thanks again for providing us clarity of the true workings of a market . . . RH
ALS: Phantom a couple of questions from Randy we should answer. His question on tracing orders,
is there other info or stats that one can request other than time and sales and price?
POP: The best way to trace an order is to know the phone clerk by name who takes your order and
to identify the runner who takes your order into the pit. For me this is pretty easy to know because I
am pretty well known for requesting all the information I need to keep the integrity of my orders
going into the pit.
I like to have the information because I like to prove to myself that the myths of what happened to
an order are just that – myths. Most of the time other traders who put orders into the pit are not
aware of what has happened because of fast markets or newly reported information. They only
know that they got a bad fill.
Well bad fills all have a good reason. Every time I check to see the reason for my bad fill, I have
verified the circumstance that it has indeed been at my own hand that I got a bad fill. I didn’t know
at the time when I placed my order that I didn’t have the timely news or what the liquidity was at the
time. How can we always know the situation at all times? We can’t!
You see it is easy to use a crutch in blaming some reason other than a fact, which we don’t know at
the time. It is wasted energy to think or fill was other than with the highest integrity. Even though I
could fill all of my own orders, I know I can do a better job giving the order to the professional
broker. Now most traders don’t know that.
On tracing orders most of the time, you can get time and sales but the true event is that your order if
a market order can be filled anywhere within a time limit of say two minutes. Now have you ever
seen a market move in two minutes? Of coarse you have!
A market can move quite a lot in two minutes. How do you win the game? If you put enough orders
in you will find that it tends to even out. If you put few orders in you will find that you tend to get
the short end of the stick as Randy suggested. The short end of the stick is that you will put your
orders in just as the market is changing direction and starting to go against you.
You know what the market is going to do and it has already done it by the time your order reaches
the floor and you got the slippage from the market reaction. The quotes you receive are not the
same as the bid and offer in the pit when you put the order in. There is always a lag. I can stand in
the pit and watch the tape and be behind as much as minutes at times. I bid and offer according to
what is going on around me in the pit. The public can not do that. At times you are better off with
resting orders but execution is always the most important part of order placement if you don’t trade
Ok, time and sales is it and the rest of your research is on your shoulders to check your broker,
runner an phone clerk. A good commission house will do this for you but not always when the
market is open. Do it when the market is closed and keep your own records. I consider it as if I am
hiring the people who work my orders both into the pit and in the pit.
ALS: What do you think of Randy’s ideas on his interpretation of running the stops ideas?
POP: I don’t mean to remark lightly but Randy has a good handle on the correct interpretation of
what I meant. I can’t really add anything to his correct ideas.
ALS: Another question for you on stops and a big report. Any other ways to see the bad buying or
selling other than the looking at the same chart everyone else looks at?
POP: I see the reason for Randy’s question on the bad buying and selling. In the pits it is pretty easy
to see what is going on. Off the floor it is a sense that we have to be alerted to in our thinking. We
must know the possibilities of why things happen the way they do in markets. People will trade like
herds at times and when the herds are finished in their positioning the market takes a breath and the
move start to fade.
It is the lack of follow through that tells us when we have seen bad order placement. When we are
away from the floor we must be aware of lack of follow through. It happens at the highs and lows
because of momentum trading which causes the moves to be quick and sometimes cause artificial
My suggestion is to be alerted as to how quick a move happens and then to watch for the follow
through in a proper amount of time. Each market is going to take a little different reaction to such
Randy has my idea on rule one and the way I trade correct. It is the criteria of follow through with
the combined knowledge of what day traders have done up to the last hour which I use to help
generate a trade during the last hour or two. It is more powerful for me to get the bounce in
In fact I have a chapter or two or even a book on the systems I use in trading. Of coarse I would not
give all of the inputs but enough to help most traders establish a game plan that would match mine.
ALS: Do you want to address any other situations on order fills?
POP: No, I don’t as I think it is research that each trader must make on their own and I can not give
them the results of their ideas of bad fills. They must slay that situation themselves in order to have
the confidence of putting it behind them.
ALS: You’ve been generous in helping me write Phantom’s Gift. I know the traders do appreciate it
and wonder what are the plans from here?
POP: You know I have been rewarded and as I watch posts of forums I see the affect this project
Art, I think it is time to see how Robbie does in his trading. We must step back and be the observers
ALS: Does this mean this project is completed?
POP: Art, you know that the project is not completed. I see the CD on your desk and I see
Phantom’s Gift in red on the cover. I also know we have the best for last. Now who wouldn’t suspect
that? We want our traders to make it big. So far they have had lots of insight to interpret on their
own. You know the respect and expectation I have in the small trader. It shall happen that they are
the winners. For how long I don’t know but they will be the unexpected winners.
The next step is to point out where the pot of gold is. I recommend a good book on technical trading
to add to your library. It is called “The Handbook of Technical Analysis” and written by Darrell
Jobman. Unless you have seen Darrell Jobman’s new internet video I would suggest you take a look
at it too.
ALS: I see you can get the tape with Darrell’s book free. I haven’t seen it what do you think of it?
POP: First class just like Darrell!
ALS: Do we go ahead with Phantom’s Gift on CD with the rest of the story chapters? If so what will
POP: Only if our traders want it! Production and distribution will have a cost. It’s up to our traders
as to what they think it is worth to them. That will be the cost. It has to meet cost of production and
distribution. It is all up to our traders!
ALS: What’s is next?
POP: I am a good observer. I know our traders. Some know me already! It shall get better for the
small trader. To keep my mask on makes me pretty obvious but the small trader has the best
advantage this way. Let’s keep it that way. Offers are offers but I want to see my little Phantom’s
ALS: So Be It!
“To keep my mask on makes me pretty obvious but the small trader has the best advantage this way.
Let’s keep it that way. “—POP