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Sometimes it is easy to sell at close.
Look for example at yesterday´s CSCO. The more you could wait, the
best for the final price.
But, it is not always. We often see a quick sell-off the last 10-15
min and we loose the high price. In this case, waiting for a come
back is catastrophic, especially if your target is some 5%. The bad
news is that the next day open may be a gap down...
After hours is always better, when available.
DT
--- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxxx> wrote:
> Hi Jim,
>
> Tuesday, February 11, 2003, 3:59:28 AM, you wrote:
>
> JH> Your system will get a high return on account because there is
no
> JH> trade delay set "SetTradeDelays(0, 0, 0, 0);". You are buying or
> JH> selling at the close on the same day the trading signal is
> JH> generated. Which would not be possible in real life. You can not
> JH> trade at the close after the close.
>
> You can, and I do sometimes, but it certainly has pitfalls that
would
> need to be addressed by any system that you would test this way.
>
> The main problem is that some signals will be ambiguous just prior
to
> the close. Maybe the bid-ask will actually be straddling the signal
> price, or jumping around on both sides of it. You would have to
make
> a guess to take such a trade (the back tester would not be guessing
> of course), and sometimes you will get caught making the wrong
guess.
> When you compound this inherent problem with a large basket of
> stocks, such a system really becomes unworkable. You simply cannot
> monitor and execute just prior to the close on a large basket with
> many ambiguous signals.
>
> At times, however, and especially with very small baskets of stocks,
> there is going to be no ambiguity. You are going to know there is a
> signal prior to the close, with almost zero probability of that
> signal coming off by the close. My experience with short-term
> systems and trading suggests that these signals should be taken,
> because they are more profitable and less risky then waiting for the
> subsequent open.
>
> I think that to test such a system, however, and to have the test
> anything close to reality, you need at least 2 things:
>
> 1) a rather small basket of stocks -- small enough to execute
> properly just prior to or on the close (would have to be only a
small
> handful, I would suggest)
>
> 2) back test only for those signals that would be unambiguous, i.e.,
> your back test would only take signals x percent 'deep' into the
> signal area, signals that would have an extremely low probability of
> canceling out before the close
>
> Depending on how deep (unambiguous) you require the signal to be for
> purposes of back testing, you could end up with a system that might
> actually trade *better* in practice than it back tests (wouldn't
that
> be a refreshing change?). ^_^ The reason is that you could require
> a very deep signal for back testing, deeper than you think you would
> actually need in real trading. So your back tested system would
> likely take fewer trades than you would take in reality if you set
it
> up this way. The caveat of course is whether there would be a marked
> performance difference between the 'deeper' signals and the ones you
> might take in practice that you would be programming your back test
> to ignore. Further back testing might shed some light on the
> probabilities there, however.
>
> Such a system is a problem, but I don't think we can dismiss these
> systems out of hand. I sure don't think you can test them
> realistically on even 50 stocks, however, or on even half that many.
>
> Best,
>
> Yuki
>
> mailto:yukitaga@x...
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