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Hello Shashi,
If in your quiz tomorrow will be day 1, than today's day 19 will be day 20
tomorrow.
Than I'm with trader B. today.
Rgds
Frans
At 11:14 AM 10/22/2001 -0500, you wrote:
>For purposes of this quiz only, assume that the stock has been rising every
>day. In other words, each bar is higher than the previous one. [This
>simplifies things, otherwise the low of "x" days - where x could be 4, 7,
>10, or whatever - could potentially be the lowest low of last 20 days and I
>wanted to avoid that variable.]
>
>What happens on the next trading day is not relevant - whether the stock
>goes up again or has a huge fall is not relevant. The question is which
>trader is setting his sell stop correctly. The simple sell rule is "sell
>when the stock makes a 20-day low" - a common condition that many traders
>follow or something similar to it [Remember the Turtles? One of their buy
>(short) criteria was a stock making a 20-day High (low)]. If you follow
>something similar in your own trading, or came across a system that had this
>as its sell rule, you may make the same the same mistake that 2 of these 3
>traders are making - and this of course will violate the rules of the system
>or your own trading! And the quiz is merely to illustrate this point - how
>even simple things may be misinterpreted.
>
>In the quiz, there are 3 hypothetical traders that interpreted this simple
>rule 3 different ways but there can only be *one* correct answer.
>
>There is a catch in the quiz which experienced traders will (hopefully) see
>through. Believe me, the answer is *not* difficult and it *is* one of those
>3 traders. Question is - which one? Answer in a couple of days.
>
>Shashi
>
>------------------------------
>
>Date: Sun, 21 Oct 2001 22:48:30 +0200
>From: Frans Derksen <fjderksen@xxxxxxxxx>
>Subject: Re: A tale of 3 traders...
>
>Yes i think so too. And this low could be day 4 or 5 or 10 or whatever in
>this example.
>Why should day 20 be the lowest low in 20 days ?
>
>Frans
>
>At 12:12 PM 10/20/2001 -0400, you wrote:
>>Shashi,
>>
>>Tell me if I am wrong but to me a 20 day low is the lowest price in the
>>last 20 days.
>>
>>Holland
>>
>>Shashi Aggarwal wrote:
>>>
>>> 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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