Market orders at the open: how an "end of day" signal is executed and what slippage costs

Many trading systems, Ecliptic Alerts among them, work "end of day": they compute the signals with closing prices and execute them at the next open. It is a way of trading that does not require sitting in front of a screen, but it has a cost of its own that should be understood: the difference between the price the system assumed and the price actually obtained. This guide explains how such a signal is executed, step by step, and how much that difference usually costs.

What an "end of day" signal is

The US market closes at 4:00 pm New York time (5:00 or 6:00 pm in Argentina, depending on whether daylight saving time is in force in the United States). Once it closes, the day's prices are fixed, and a mechanical system can use that data to compute what to buy and what to sell. The signal is sent that afternoon or evening: "buy X, sell Y", with quantities.

The important part is that the signal is computed with the close but cannot be executed at the close, because the market is already closed. The first real opportunity is the next day's open, at 9:30 am New York time (10:30 or 11:30 am in Argentina). More than 17 hours pass between one moment and the other, during which the price can move: news, earnings, whatever happened in Asia and Europe. That difference is called the opening gap, and it is part of the process, not an error.

How it is executed: the opening auction

The open on US exchanges is not a chaotic instant: it is an auction. From before 9:30, brokers accumulate buy and sell orders, and at 9:30 the exchange computes the single price that matches the largest possible quantity. Every order that takes part is filled at that same opening price.

To take part, the simplest path is a market order sent before the open. Many brokers offer the specific order type "market on open" (MOO), which ensures the order enters the auction; with others it is enough to send the market order the night before or early in the morning. The practical sequence is:

1. The signal arrives in the afternoon or evening.
2. The orders are entered in the broker that night or before 9:30 am New York time.
3. At 9:30 they are filled in the auction, all at the opening price.
4. The next afternoon the next signal arrives, with the position already taken.

Ecliptic Alerts sends the list of signals in the afternoon, with the close, so that each subscriber can enter it in their own broker for execution at the next open. It does not trade anyone's account and does not hold anyone's money; each person decides and executes. This is not financial advice.

Market order vs. limit order

A market order instructs "buy at the available price". A limit order instructs "buy only if the price is this or better". The limit order appears safer, but for an end of day signal it has a problem: if the price opens above the limit, the order does not fill and the trade is missed. And the trades missed in this way are, frequently, the ones that rise the most, because they opened with strength.

A system that was tested with opening prices assumes that all signals are executed. If you execute only the ones that open at a lower price, you are trading a different system, for which there is no backtest. That is why market execution at the open, even if it costs somewhat more, is what keeps actual trading close to what was measured.

What slippage is and what it is made of

Slippage is the difference between the price the system assumed for the trade and the price actually obtained. It has three components:

• The spread: the distance between the best bid and the best ask. In a large US stock it is cents; in a small or thinly traded one, it can be considerably more.
• The impact of the order itself: how much the trader's own purchase moves the price. With a US$10,000 to US$50,000 account trading liquid stocks, it is practically zero: the order is a negligible fraction of the auction's volume.
• The difference between the reference price and the actual one: if a backtest assumes the purchase was made at the close but in practice it was made at the open, the whole gap between the two is "slippage", against or in favor. An honest backtest of an end of day system simulates the purchase at the opening price, not the close. It is one of the first questions to put to any service.

How much it costs, in money

Orders of magnitude, for liquid US stocks and ETFs and small orders: between a few basis points and ten or fifteen (a basis point is 0.01%). On a US$3,000 position, 5 basis points are US$1.50; 15 basis points, US$4.50. The commission, at most international brokers today, ranges from zero to one or two dollars per order. Round trip: a few dollars per trade, plus whatever is lost in the spread.

It is not much, but it is not zero either: a system that trades frequently and makes little per trade can lose its entire edge to this cost alone. A system that trades rarely, with positions that last days or weeks, is affected much less. What matters is not the cost per order but the ratio between that cost and what the system makes per trade on average. If the service does not publish that number or cannot explain how it was simulated, it should be asked. If there is no answer, that is grounds for suspicion.

Three common mistakes

1. Executing late. Entering the order at 11 am New York time, when a free moment is available, is not executing at the open: it is trading a different system, at a price that has already moved.
2. Filtering signals at discretion. "This one does not look right, it will be skipped". Every skipped signal moves actual trading away from the measured system; afterwards it will not be possible to tell whether the result belongs to the system or to the omissions.
3. Reducing the order out of fear of the gap. The gap is included in the backtest if the backtest uses opening prices. Reducing the position manually is changing the rules without measuring.

An example day shows what a real list of signals looks like: https://eclipticalerts.com/?demo=1