Mechanism
- Limit orders compete for fills at the same price.
- Most venues award fills by time priority (first in line).
- When price touches a level briefly, only the front of the queue gets filled.
Microstructure note: stops fail most often at the same time liquidity disappears. That is not bad luck; it is structural. Your job is to avoid competing for fills in the worst queue.
- Prefer “don’t trade” windows over cleverness: rollover, open/close, data prints.
- Reduce size before you reduce stop distance. Size is the only lever that always works.
- Measure slippage by regime, not by average.
How it kills accounts
Late limit placement → missed fill → chase with market → worse price → emotional management → you convert a good plan into a bad entry.
How it kills accounts:
- Edge looks fine in backtest.
- Live spreads widen at the exact wrong moments.
- Stops trigger inside noise, so you widen stops.
- Same size + wider stop = silent leverage increase.
- A normal spike becomes structural damage.
Rule that survives
- Decide if you want price or certainty. Don’t pretend you can always have both.
- If fills matter: place early, use smaller size, or accept partial fills with a plan.
- Missed fills are information. Don’t “fix” them by chasing.
Rule that survives:
- Spread is a gate, not a footnote. If it’s abnormal, you don’t trade or you trade smaller.
- Assume worst-case fills in fast markets.
- Size is the adapter: reduce size before changing the stop model.
Example archetype
You set a perfect limit at a key level. Price tags it for a second and bounces. You’re behind the queue, get nothing, then market in higher out of frustration.
Tell: if the trade only works when the spread is tight and price is smooth, it’s not an edge, it’s a regime bet.
Deep dive
Deep dive
In limit-driven markets, a “level” can be crowded. If you join late, you get filled last or not at all.
This is why “I was right but didn’t get filled” is common: your analysis can be correct while your queue position is terrible.
Glossary pointer: queue priority.
Field checklist
- Measure spread before entering. If it’s abnormal, you’re trading the wrong product at the wrong time.
- If volatility expands, reduce size first. Don’t “solve” it by widening stops with the same size.
- Avoid the predictable liquidity holes: rollover, session open/close, first minutes after data.
- Assume your stop may fill worse than your entry. Price the worst-case, not the brochure.
- If you cannot explain where liquidity comes from, trade smaller.