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Agree with most of what u have here. Open is definitely the worst
price. Gunning for stops happens, but one could be often right
in predicting just where the gunning will stop, and that is where
well reasoned limit orders serve as well. I trade stocks and most
of the time I am in/out with on stop limit orders.
nand
--- In amibroker@xxxxxxxxxxxxxxx, "phsst" <phsst@xxxx> wrote:
> Many of us approach trading system development with blinders on.
What
> I mean by that is that we instinctively limit ourselves to our own
> poorly constructed preconcieved ideas, or we are leashed to
> "conventional wisdom" (which can be a real killer). When shackled by
> blinders, we do not use AmiBroker to its full capabilities.
>
> EXAMPLE:
>
> Earlier this week Jayson replied to a sample trailing stop post I
> made. Jayson pointed out that the fixed stop level of the previous
> days Low minus .50 would probably work better with a variable amount
> based upon the Tickers underlying price. For the record, I've
> backtested many variable level stop loss systems and the best single
> stop loss level I have is a fixed amount for all Tickers and issue
> prices. FWIW... minimize your own assumptions about what SHOULD
work,
> and be flexable enough to go against your instincts.
>
> And this week Fred (who only trades MF's, not stocks) expressed the
> very strong belief that only mental trailing stops should be used
> because Mkt Makers have a reputation for 'gunning stops', and that
> placing actual stop loss orders is the equivilent of hanging a sign
> around your neck saying "SUCKER" (my interpretation of Freds post).
>
> All I can say is this:
>
> I trade stocks. And I have quite a bit of experience doing it...
> profitably. I use actual stop loss orders AT ALL TIMES! Sure...
I've
> been the victim of 'gunning the stops' a few times. But much more
> often I've seen stock price action come within a penny of my stop
> before reversing and making me even larger profits.
>
> I use Limit orders to open positions, and you might assume that when
> unusually bad news or adverse rumors occur before market open on a
> stock that I have a limit order in place on that the MM's would hit
my
> limit price BEFORE dropping the price, right? NOPE... I can't tell
you
> how many times I've placed limit orders the night before and had
> adverse news or rumors gap the price against my intended position
and
> I almost always get executed AFTER the gap has occurred, either
buying
> lower than I specified or shorting higher than I specified. And I
feel
> pretty sure that after all the dust has settled, I've actually
> profited from these situations because the actual OPEN is usually
the
> worst price of the day.
>
> My point is simply this... try to rise above your preconcieved
notions
> or 'conventional wisdom'. Backtest every situation. Analyze, Analyze
> and then analyze some more. Then if it still looks good but you
> continue to be suspicious then make small trades just to see what
> happens. You might be risking a few bucks only to learn that you've
> got a good tradable system.
>
> If you disagree with the above and you have stock trading experience
> then OK. But if you disagree... and you have no stock trading
> experience... then think carefully.
>
> Another point... When I worked for others, some of the most
> significant career accomplishments came from ignoring conventional
> wisdom and probing all avenues for solutions.
>
> And earlier this week someone posted that they had the book 'Street
> Smarts' which is where I got my idea for the 'Holy Grail' trading
> system. They said that they had programmed the Holy Grail system and
> it did not work. I can easily believe that because it did not work
> for me either as it was posted in the book. It took weeks of
gyrations
> using logical derivitives of the trading system before I gradually
got
> it to work. So if a trading system idea seems to make sense to you,
> don't give up too early.
>
> Finally this negative observation... For years I looked at charts
> using the RSI, Stochastics and MACD indicators and thought to myself
> that "They ought to work" in a mechnical trading system. But after
> years of playing with those as the primary indicators I still have
not
> come up with anything significant.
>
> Phsst
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