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I am learning about tick-sensitive orders. I know that there are two kinds of tick-sensitive orders:

  1. Buy downtick order: can be filled only on a downtick or zero downtick price.

  2. Sell uptick order: can be filled only on an uptick or zero uptick price.

However, in Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris, the following question appears as an exercise (chapter 4, page 88):

Why are there no buy uptick and sell downtick orders?

Indeed, why? I've been thinking about this for some time now, but I am not able to find the answer. As far as I understand, tick-sensitive orders are not replaceable with regular limit orders or market orders, so why don't "buy uptick" and "sell downtick" orders exist?

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  • You are aware that in many exchanges a great deal of order types exist you are not aware of? And that the rest can be easily simulated by a colocated trading system?
    – TomTom
    Aug 3, 2020 at 14:54
  • Liquid assets trade thousands of time every second, such an order would be useless because it would execute within seconds on a trivial movement.
    – Money Ann
    Jun 1, 2021 at 0:27

1 Answer 1

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Why are there no buy uptick and sell downtick orders?

I think the textbook is looking for this answer:

Buy uptick and sell downtick orders increase volatility, which is undesirable. If buy uptick orders were widely used, a single uptick could cause a huge cascade of buy orders, which could cause the price to rise more than it would without such orders. Similarly in the other direction for sell downtick orders.

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  • Given the OP's definition of the two order types, I think the inverse would be true, and that they would actually decrease volatility. The "sell uptick" would provide downward pressure on price during an uptick. Similarly, the "buy downtick" would provide upward pressure on price during a downtick.
    – DoYouEvenCodeBro
    Jun 1, 2021 at 19:45
  • @DoYouEvenCodeBro I don't understand the issue you are raising. Perhaps my answer was not clear enough. Edited.
    – Flux
    Jun 1, 2021 at 21:03

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