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Sashi
Nice little quiz. I'd say none of the Traders are right (depending on the
interpretation of your description). If sell stop is based on lowest value
in last 20 bars it could be reset by lowest value from any of the last 20
bars - including last bar just downloaded (bar 1).
Several interpretation queries arise on reading which may affect the
"correct" answer:-
a) Is sell stop value is to be based on lowest Close or lowest Low?
b) Is "steadily rising" to be interpreted as each Closes is higher than
previous bar Close?
c) Is bar 1 to be taken as another consecutive higher Close or could it be a
drop?
John
----- Original Message -----
From: "Shashi Aggarwal" <shashiag@xxxxxxxxxx>
To: "Metastock Digest (E-mail)" <metastock@xxxxxxxxxxxxxxxxxx>
Sent: Saturday, October 20, 2001 3:15 PM
Subject: A tale of 3 traders...
> Here is a little quiz. Its mainly for the benefit of less experienced
> traders on this list. Since I devised this quiz myself, its not too
> difficult ;-) By the way, this is how many people trade and make simple
> mistakes.
>
> For purposes of this quiz, we will assume that the last bar (today)
> displayed in a chart is bar 1, the one before that (yesterday's) is bar 2,
> the one before that is bar 3, and so on.
>
> There are 3 traders - A, B and C. They all have day jobs and when they
come
> back home from work, they download the latest data and then look at the
> daily charts of their stock holdings on their computers (in Metastock!)
> Based on this, they then go to their brokers' websites and place
appropriate
> orders. e.g. based on the chart, they update their sell-stop price daily.
>
> Lets say all 3 have a long position in a particular stock which has been
> climbing steadily. They have only one sell condition - namely, sell when
the
> stock makes a 20-day low. This is what they do:
>
> Trader A - he chooses the low price of bar 20 (latest bar is bar 1, one
> before is bar 2...see above) and selects that as his sell-stop
> Trader B - he chooses the low price of bar 19 for his sell-stop
> Trader C - he chooses the low price of bar 18 for his sell-stop
>
> Which trader is right? Remember, the sell condition is "sell when the
stock
> makes a 20-day low". Answer tomorrow.
>
> Shashi
>
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