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Intermilan004,
Thanks for your post as it raises some interesting trading issues.
1. 10 ? 20 year trading systems.
I empathize with you that your `tried and tested' system is not
going so well.
The market can appear cruel and capricious at times.
When I was at school I was not a mathematics geek, but, since
becoming a `trader' I sleep with a book on probability theory under
my pillow.
If you toss a coin often enough extreme sequences will occur.
In fact, statistically speaking, they can occur at any time.
Even a slightly biased coin will behave in a similar manner.
Extreme winning sequences or extreme losing sequences can occur in
average systems or even `good' systems.
If you have traded a system on a daily basis for 10 years that is a
statistical set of 2520 trades, which is quite a small set.
I also have a theory that the nature of the markets has changed in
recent years due to the increased use of computers.
Look at the trading power that programs like Ami place in the hands
of retail investors.
This is a relatively new phenomenon.
At the least I would expect this to lead to more short-term
volatility.
I stress this is only a theory and I have no evidence to prove the
argument.
2. Trading at the open.
I have only been taking trading seriously for 4 years.
Even then my first 2 years were mostly wasted time and money,
despite the fact that I paid for trading `guru' advice and
bought 'sure thing' training material.
Even after 1000's of hours experience I am still just serving my
apprenticeship.
So even though I intend to trade the open, as it is a major part of
the `business', I postponed my studies in that area while I pursued
easier pickings elsewhere.
Thanks to your topic and the posts of others I have learnt a bit
more about how different markets and traders treat the open and that
some markets/brokers may `guarantee' all participants the open
price, I stress the word might.
I still have a lot of work to do before I fully understand the
subject.
So far I have only watched the Australian equity market on this one.
The ASX site has some very good educational material available.
>From their site:
Calculating OPening & Closing Prices.
The same formula is used to calculate:
Opening prices at the start of each trading day.
Closing prices at the end of each trading day.
Float prices.
The price of a security after a trading halt or suspension has been
lifted.
The price of a security after a new listing.
How are opening and closing prices calculated?
The opening and closing price for a security is determined by a four
step approach involving the use of conditional decision rules. If a
clear result cannot be achieved when the first decision rule is
applied, the model progresses to the second decision rule and so on.
The decision rules are always applied in the same order.
Schematically; Principle 1 achieves a subset of potential auction
prices from the list of overlapping buy and sell order prices.
If the subset consists of one price only, this becomes the official
auction price and the process concludes. Should the application of
Principle 1 achieve more than one potential auction price, the
algorithm moves to Principle 2 to narrow down the options. If
Principle 2 eliminates all but one of the options, the remaining
price becomes the official auction price and the process concludes.
If however, the auction price is not determined by applying
Principle 1 or Principle 2, the process moves to Principle 3 and
then Principle 4 if required.
The full article, including market depth tables can be viewed at:
http://www.asx.com.au/investor/education/basics/open_Close.htm
The problem I had with this particular market was that I couldn't
see any correlation between the pre-market depth and the actual
opening price, without access to the algorithm used.
In all markets, in general, opening gaps have to be handled on the
fly, and also, if 1000 traders are queued to buy the open, but only
10 are queued to sell it, some-one has to miss out.
There is also the issue of opening volatility.
In the Australian market, the price after 15 minutes, is often miles
away from the open, so this needs to be managed.
Volatility is a two edged sort and can work for or against the
trader.
Also opening gaps do not have a significant statistical edge and
they are often not sustained.
The opening fast moving trend often fades quite quickly as well, so
there is quite a bit at t he open to contend with.
All in all, I need to understand the risks inherent in trading the
open better and figure out ways of managing that risk before I go
there.
I am sure many traders handle it with ease and so will I once I have
the time to do the requisite homework.
BrianB2.
--- In amibroker@xxxxxxxxxxxxxxx, "intermilan04" <intermilan04@xxx>
wrote:
>
> Hi all,
>
> I'm just curious if anyone here are buying and selling securities
at
> the open with market orders, i.e. orders are placed BEFORE MARKET
OPEN
> and they get executed as soon as the market opens.
>
> I have noticed that buying at the open might help you get cheap
> shares, but the reverse is also true...you might sell your shares
at
> really bad bids.
>
> The reason why I'm bringing it up is, my system on Amibroker is
> designed to trade at the open. And strangely enough, my system
isn't
> doing too well ever since I started using it...perhaps it's because
> I'm getting bad bids and asks by placing market orders overnight?
>
> I'm not quite sure how the first trade occurs, in theory I sell to
the
> highest bidder but with low liquidity of pre-market trading, what
if
> the highest bid is absurdly low?
>
> Any thoughts on this is greatly appreciated.
>
> Regards,
>
> intermilan04
>
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