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Hi Yuki,
Thank you for your thorough reply.
While I agree with a wide bid/ask spread and orders appearing and
vanishing at incredible pace, I still think that having some kind of
stop-loss measure is a valuable strategy. IMO, just as likely as you
stop out lower than 3%, you can stop out higher than 3% (I've seen
that to happen on my position before). A 3% stop-loss order might not
get you out at 3% all the time, but it is the best one can do to limit
the loss.
Regards,
intermilan04
--- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxx> wrote:
>
> Hi intermilan04,
>
> Let me take a shot at that one. ^_^
>
> At least here, there are *plenty* of stocks with a wide bid/ask
> spread, even stocks that trade 10 million shares or more a day. It
> depends on the stock, and on the time of day, and on the overall
> market.
>
> Moreover, even with bids and offers up and down the line, you might
> be *amazed* at how quickly those bids can vanish in response to some
> negative event, or how one really *large* at market offer (not
> yours), or a bunch of at market orders hitting at the same time, can
> move the stock suddenly out of the congestion zone, where there are
> air pockets galore. Your stop has to be "at market" of course (not
> stop-limit), or you have no assurance of ever getting out. Most
> people don't have privileges to see the entire bid-ask tree. They
> don't see the (sometimes *huge*) air pockets that are lurking above
> and below the current congestion zone. A stop loss at market only
> guarantees you'll get out. It absolutely does *not* guarantee you'll
> get out at some minimum percentage loss. Often? Maybe. But you
> can't bank on it. And the problem is, when you really need it,
> that's when it becomes problematic.
>
> Yuki
>
> Tuesday, April 18, 2006, 11:52:06 AM, you wrote:
>
> i> Fred,
>
> i> Could you explain as to why 3% wouldn't always limit losses to 3%?
> i> Assuming the stock has some volume (at least 100K), and I set stop
> i> loss order as soon as I buy stocks...I'm not quite sure of the
> i> circumstances where 3% stop loss would not work.
>
> i> My system is a daytrading system so there is no gap ups and downs.
>
> i> Regards,
>
> i> intermilan04
>
> i> --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@> wrote:
> >>
> >> Just keep in mind that a 3% stop loss does not necessarily limit
> >> losses to 3% ...
> >>
> >> --- In amibroker@xxxxxxxxxxxxxxx, "intermilan04" <intermilan04@>
> >> wrote:
> >> >
> >> > Phsst,
> >> >
> >> > I don't like the trade drawdown more than the system drawdown. I
> >> used
> >> > to think that having a large trade drawdown was OK as long as the
> >> > system drawdown was small, and I think I was wrong.
> >> >
> >> > As a daytrader I take and close out positions daily. Imagine
having
> >> > lost 7% on a single trade and having to close out the position at
> >> the
> >> > end of the day...you just registered a huge loss. You are left
with
> >> > negative emotion, frustrated because of the lost money. You start
> >> to
> >> > worry about your trading capability and such. I know it's
> >> > psychological stuff but quite important one IMO.
> >> >
> >> > So, as I mentioned earlier I limit my loss at 3%, no matter what.
> >> For
> >> > whatever reason or for no reason, if stock moves 3% against me, I
> >> get
> >> > out. I'd rather not lose 3%, but settling for a 3% loss is
> >> certainly
> >> > better than not having a stop and have a potential to lose big.
> >> >
> >> > --- In amibroker@xxxxxxxxxxxxxxx, "Phsst" <phsst@> wrote:
> >> > >
> >> > > Fred's point is accurate IMO....
> >> > >
> >> > > If the Trader has spent blood, sweat and tears over a period of
> >> years
> >> > > building up a serious trading equity, then a 28% System Drawdown
> >> would
> >> > > be demoralizing (only after causing a serious case of "Butt
> >> Pucker").
> >> > >
> >> > > A subsequent post from Ed showed a 'Max Sys DD = -3.6%', but only
> >> > > included 48 trades... which because of the small number of trades
> >> > > seemed to me to be statistically irrelevant.
> >> > >
> >> > >
> >> > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@> wrote:
> >> > > >
> >> > > > A Comment and a suggestion ...
> >> > > >
> >> > > > - DrawDowns ... I could be wrong but I suspect most people
> >> can't
> >> > > > tolerate 28% DD's ... To bring that number down to the point
> >> where
> >> > > > at least some people would be comfortable with it using real
> >> money
> >> > > > one would I think have to cut it half. Doing that with an
> >> existing
> >> > > > system by restricting how invested one is will result in the
> >> CAR
> >> > > > being reduced to the square root of its original number.
> >> > > >
> >> > > > - Objective Testing ... Take your data, cut in half ...
> >> Optimize
> >> > > > your system over half of the data and then test the parameter
> >> values
> >> > > > on the other half. This rudimentary view of out of sample
> >> testing
> >> > > > will give you some idea of what you are likely to
experience in
> >> real
> >> > > > trading as opposed to totally in sample results.
> >> > > >
> >> > > > --- In amibroker@xxxxxxxxxxxxxxx, "intermilan04"
> >> <intermilan04@>
> >> > > > wrote:
> >> > > > >
> >> > > > > Since I have optimized my system between 1996-2006, I guess
> >> the
> >> > > > > answer would be the same time period.
> >> > > > >
> >> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@> wrote:
> >> > > > > >
> >> > > > > > That doesn't answer my question ...
> >> > > > > >
> >> > > > > > In the development of the system what range of data ( time
> >> > > > period )
> >> > > > > > did you use ? The same time period ? An earlier one ?
> >> > > > > >
> >> > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "intermilan04"
> >> <intermilan04@>
> >> > > > > > wrote:
> >> > > > > > >
> >> > > > > > > The numbers are the result of backtesting my system with
> >> > > > > > > NASDAQ and NYSE tickers (around 7000 tickers) between
> >> > > > > > > 1996/1/1~2006/1/1.
> >> > > > > > >
> >> > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@>
> >> wrote:
> >> > > > > > > >
> >> > > > > > > > Are the numbers you posted in sample or out of sample ?
> >> > > > > > > >
> >> > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "intermilan04"
> >> > > > <intermilan04@>
> >> > > > > > > > wrote:
> >> > > > > > > > >
> >> > > > > > > > > I know it depends on what you want personally for
> >> > > > risk/reward,
> >> > > > > > but
> >> > > > > > > > I'm
> >> > > > > > > > > curious as to what other people's systems (developed
> >> in
> >> > > > > > Amibroker)
> >> > > > > > > > are
> >> > > > > > > > > performing like. You don't have to share your
code or
> >> the
> >> > > > idea
> >> > > > > > behind
> >> > > > > > > > > your system (unless you want to), but I'm curious.
> >> > > > > > > > >
> >> > > > > > > > > Over the last 10 years, say, what is your annual
> >> profit %,
> >> > > > max
> >> > > > > > > > > drawdown, % winning trades, etc.?
> >> > > > > > > > >
> >> > > > > > > > > I have a long system that has returned around 110%
> >> since
> >> > > > > > 1996. Its
> >> > > > > > > > > winning % is 47%, and the system drawdown is 28%.
It
> >> is a
> >> > > > > > > > > reversal-based, swing-daytrade system.
> >> > > > > > > > >
> >> > > > > > > >
> >> > > > > > >
> >> > > > > >
> >> > > > >
> >> > > >
> >> > >
> >> >
> >>
>
>
>
>
>
>
>
> i> Please note that this group is for discussion between users only.
>
> i> To get support from AmiBroker please send an e-mail directly to
> i> SUPPORT {at} amibroker.com
>
> i> For other support material please check also:
> i> http://www.amibroker.com/support.html
>
Please note that this group is for discussion between users only.
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