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IMHO, The stop loss should be based on market dynamic, not a % of
instument price. Then, you would use the stop loss to size your position
to limit the loss to an acceptable portion of your portfolio.
Millowena
On Tue, 18 Apr 2006 11:58:57 -0000 "intermilan04"
<intermilan04@xxxxxxxxx> writes:
> 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.
>
> To get support from AmiBroker please send an e-mail directly to
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>
> For other support material please check also:
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>
>
> Yahoo! Groups Links
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>
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>
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