Markman Capital Insight

MCI Tradecraft: Setting "Limit on Close" Orders

Limit on close orders are very common in futures trading, particularly in the Gemini systems program that we license and distribute.

LOC orders instruct traders to buy or short a contract only if it is in the recommended range in the final minute of the main daily trading session.

The final minute -- 4:14 to 4:15 pm ET for equity index contracts -- typically has the most volume of the session, and also provides the final and permanent data point on which that day's trading is judged.

In the video, you will learn how to set an LOC order on the Interactive Brokers trading platform, but the concept is applicable to any other platform. The instruction for this example is to buy an S&P 500 E-mini expiring in December 2014 at 2002.50 "limit on close." The current price is around 2009.

First, right click on the name of the contract. Then choose Trade, and then Order Ticket. Make sure the Buy radio button is lit, then choose Limit order from the Order Type menu, and either type in the desired level or press the down arrow until it appears.

Then turn your attention to the Time in Force dialog. Choose "Day Order," which makes the order expire at 4:15 pm ET.

Next click on the Calendar icon, and choose the desired day and time. If you are on the West Coast, the time is 1:14 pm ET -- or 13:14 on the 24-hour clock. Set the start and end times, and then click Create & Transmit Order.

Next double-check every element of the order: The contract symbol, expiration month, order price, day and time. When satisfied, click Transmit and the order is then sent to the brokerage trade desk -- where it will be parked until 4:14 pm ET. If the price is 2002.50 or lower at any time in that minute, the brokerage will buy the contract for your account.