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Hi Tomasz & Trader,
Sunday, October 14, 2001, 5:14:23 AM, you wrote:
TJ> Trader already wrote it:
TJ> "When working with end of day data it makes no sense to even
TJ> consider trading on todays close. If you want any approximation
TJ> to reality you need to change to: buy tomorrows open (or later)
TJ> for stocks and tomorrows close for mutual funds."
I have no way to refute this, being first and foremost a trader and
not a very good system creator, coder, optimizer, etc. (^_-) But I
am curious why such a blanket admonition would be accurate. It would
seem to me than in real life if you try to trade the close, you will
sometimes do better and sometimes do worse than the close. Here in
Tokyo, for example, you cannot specify market on close, you simply
have to try to get included in the batch of electronically matched
orders that will determine the final fill (a market order submitted
about 20 seconds before the close often works, but not always). In
any case, if you are trying to trade a signal that is generated by
EOD data, and you run your data 10 or 15 minutes before the close,
you are going to get signals, and most of them, in my experience,
will turn out to be signals that will persist even after the final
close is registered and the data re-run. So, if you try and trade,
you'll get better and worse fills than the close, but over any long
term period of time you should just about average the close. So why
would specifying a buy on the close result in back tests far out of
the realm of reality?
I'm not challenging this, as there is almost undoubtedly more to it
than my current understanding, I'm just trying to understand
something that on the face of it goes against my own logic. I've
been wrong enough in the past to know this isn't necessarily the best
arbiter, however. ^_^
Yuki
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