Last Look or Firm Orders
I will talk about HFT later.
What i get in my feed is market orders not Limits.I also have an access to Limits orders but the problem with seeing limit orders which all retail brokers will show you only limit orders are that they are last look and they are not firm limit orders.If you want to be able to make any use of these Limit orders you should be able to at least know they are firm no last look.difference between last look and firm orders are this, how many times you get slippage with your brokers especially during the news.
Last look which you see at 99%. these example are not for retail orders. Here where HFT comes in. lets say you want to know where market sentiment is.one trick i use most of the time is i palace a large order I'm talking about 200 lots or more.which i have to say getting harder and harder doing these things these days to be able to trick others.first thing i do is i have to find out an aggressive buyer or seller, by doing this you should only be using algo to pull this off.warming you wont be able to do this with FIX connection, you should use ITCH and OUCH connectivity(if you use FIX you getting market data every 5 milliseconds still very fast but when you use ITCH OUCH you getting it every milliseconds) so get back to the point, I'm trying to find a aggressive buys or sellers. the key is to be able to create your own Order type.Lets say i wanna place a 200 lots at the bids to see whos going to hit it and fill my order. i start sending my order to 4 or 5 different ECNs.But i actually dont want that much exposure in the market.so we creat a market order type with algos and we place the 200 lots into their book and hold it in a very short time I'm talking about millisecond done many times a day.so lets say i send my order for 200 lots at the bid 1.1200 to see if i find aggressive sellers.sometimes we do it on the bid and ask .but lets stick the the same example and we have time limit on our Limit order( like 100 milliseconds) so if we get lucky and someone tries to hit our order hard we know there is an aggressive seller in the market.so if we do this and someone tries to hit our order and we cancle before he sends his order we rejected his order and they get filled at the worst price which is 1.11998 for example.so he wanted to sell at 1.1200 but if there is not much Liquidity he gets filled lower and slip.
this is called Last look so either we reject the order or bank or Lps reject the order.the only difference between us and banks are this,if we expose our self to the market our order gets filled not matter what but banks they have the ability to reject your order if they dont like it with couple of milliseconds.This is one way that banks they started to avoid HFT guys to be able to pull these off.with last look the price you see is not necessarily is what you get. so lets say if your broker shows you
1.1200 10 mil 1.1201 10 mil if you try to hit 10 mill at any price you may not get filled at that price since they will pull or reject it before you hit it within milliseconds. Thats why using their own build platform you will never ever ever ever able to hit those numbers unless you use the same technology as they use which is OUCH an ITCH.so in another words HFT is not necessarily means you buy something sooner than someone else and then sell it to them.Lets say i wake up everyday in the morning and buy a coffee at 8 am. if you know this you could get up sooner than me buy the coffee and sell it to me for 1 cents profit, if you do this over an over this adds up to a good profit. don't worry HFT is done. those days are over almost.and it's time to make money.
so we are using these type of tricks to be able to see where market could go in the next couple of pips.again doesn't work all the time but it works great for us.
so Limit orders that you see from some brokers feed is useless without actually being able to place large order init.
Firm price is different, what you see is what you get. you are able to hit those prices no problem.there are many other good thing about firm prices which makes the market transparent and LPs actually need to compete with one another to put their prices out to be bought or sold for profits.