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[RT] Danger - trading when the market re-opens



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FYI..

> This posting by Joe DiNapoli is being sent free to our entire 
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http://www.fibtrader.com/proprietary.html

> 
> Events of Sept 11 
> 
> Contributors to these pages may have died yesterday. My Family 
> lives in Boston and my niece was scheduled to board the flight 
> that struck the south tower. She didn't make the flight but her 
> coworker did. As a frequent world traveler on an American 
> passport I'm keenly aware of the risks. I was under death threats 
> when I spoke on financial matters in a predominately Muslim 
> country several years ago to a studious, attentive, and friendly 
> group who were also predominately Muslim. Since the weapon of 
> choice is typically knives in that country, I lined my chest and 
> stomach area with the morning paper, bunching it securely under 
> my belt. It was a uncomfortable presentation. 
> 
> Our hearts go out to all those directly or indirectly effected. I 
> guess that's all of us. My hope is that we learn more from this 
> horrific event than the knee jerk reaction of retribution. In my 
> view, it's a bit more complicated than a group of fanatics 
> attacking freedom. 
> 
> Trading after a disaster 
> How can we handle extreme emotion in financial markets? Please 
> re-read the disclaimer liberally pasted throughout our web-site 
> and literature. I'll give you my best shot at this but there are 
> no guarantees in situations like these. 
> 
> I was around in the days of $50 silver, 60 in the Bonds, and some 
> of you know I predicted the 500 point down day in the DOW in 87. 
> While this brings experience to the table it does not mean what I 
> will say below is going to be right. It's just my best shot. 
> 
> The fact that the markets are closed for a few days is a very 
> good thing. It allows the planners (Fed, market makers, 
> specialists, and exchange officials) to plan and emotions to cool. 
> 
> Firstly, If you don't have to trade, or you have insufficient 
> experience, don't trade. 
> 
> Your biggest problem in situations like these is the getting the 
> fill. Regardless of the accuracy of our approach, in times like 
> these, you have to get the fill to make or preserve capital. 
> 
> You'll likely be ruled to death by the exchanges on any of these 
> markets. If you don't know what I'm talking about see one 
> example of this in an article I wrote entitled: Where is my fill 
> !!(X'd trades) (originally published in Stocks and Commodities 
> Magazine) which is available free on the website. 
> Usually it's in our Proprietary client area but we've temporarily 
> made it available free on the following link. 
> http://www.fibnodes.com/xd_trade.html 
> 
> Difficulty in getting your fill will be proportional with the 
> panic in the market or lack thereof. 
> 
> Futures pit issues: 
> Along with X'd or canceled trades mentioned above there's the 
> "up-tic rule". Now I'm simplifying this for brevity but the 
> bottom line is that if prices keep falling without an up-tic 
> you're not "due a fill" as a seller… 
> Even with a market order. Those standing in the pit will be the 
> ones that are able to sell when bids come in. They will be sure 
> there won't be an up tic until sufficient support is apparent, 
> usually at a very major fib number like the ones we've been 
> talking about for the past year and a half! 
> Your sell orders will then be filled at the bottom when they want 
> to buy (from you). 
> 
> Then there's fast market rules which basically say they can do 
> about anything they want down there with your order. You can make 
> money one way for sure, bet with someone crazy enough to take the 
> bet that whatever the specialist, floor trader, etc. do with 
> your order, it will not be in your financial best interest. 
> You'll win the bet but you'll lose on the fill. 
> 
> Electronic trading: 
> Depending on the panic or lack thereof, this is a big test for 
> the electronic trading computers and I don't know how it will 
> come out. I do know that those Electronic trading agreements 
> we've all signed are not designed to protect us. Re-read them. I 
> would not count on being treated much better in that medium than 
> any other. 
> 
> NYSE: 
> Anyone selling on the 500point down day in 87 was filled at 
> 500points down even if they sold when the market was only 100 points down. 
> "Orderly market" mandates do not mandate specialists to loose 
> billions in a day getting you your fill-- If you sell in a vacuum 
> you are at their mercy. 
> Most of you are aware of the up-tic rules when going net short on stocks. 
> 
> 
> NASDAQ: 
> Again, those trading in 87 know how market makers treated the 
> public. Yes there have been rule changes but if it comes to Major 
> market makers loosing billions or you getting your fill, guess 
> who'll be the looser. 
> 
> ECNs will be available to NASDAQ market makers to lay off orders, 
> so the ECNs may not be a haven either. You need a bid to get a fill! 
> 
> Perhaps the Fed or something else has given guarantees or some 
> such thing to large entities or institutions to keep things 
> orderly. I don't know but I would guess they have. 
> 
> Lets take 3 orders-- in a market we'll call "WAFTT index" (Where 
> Angels Fear To Tread). The situation may vary depending on the 
> market you trade but the outcome will likely be the same. 
> 
> 1)You're a short seller initiating a position at market. The 
> market last is 20,000. Your filled 10000 lower, at the low, since 
> there's no up-tic. 
> The market closes 5000 up from the low. You were right, the 
> market is off 5000, but… you Lose! 
> 
> 2)You're a buyer initiating a position in WAFTT, at the market 
> you're immediately filled at 19999. The market trades 9999 
> lower --you're sold out of your position by your broker for 
> insufficient margin, at the low, a market maker, or local, or 
> specialist takes your sell, he's up 5000 and you're in deficit. 
> 
> 
> 3) You're closing an existing short position at a pre determined 
> DiNapoli profit Objective-- It's a perfect play, WAFTT cover the 
> short at 10,003. The market goes through your buy point by a few 
> points. But you didn't get the fill --fast market, X'd trade, or 
> the order matching computer broke or was overloaded. You can't 
> get reporting on your trade as the exchange is too busy and you 
> don't know until that evening when the market closed that you 
> did not get filled. Or perhaps you've 
> re-sold, Thinking you were flat, on a bounce and now you're 
> short 2 times the position and the market is 5000 off the lows. 
> Called higher tomorrow. There are many miserable scenarios and 
> yes I'm simplifying possible events but these are real possibilities. 
> 
> So what do you do?… 
> If you don't have to trade, or you have insufficient experience, 
> don't trade. 
> Don't sell or buy into a vacuum. Wait for retracements and place 
> your orders so price action is apt to move significantly through 
> your pre-calculated price points to better ensure your chance of 
> getting that fill. 
> Record any conversations with brokers. Time stamp all orders! 
> If you trade electronically have back up phone numbers. Have back 
> up local numbers as well as 800 numbers. Have an automatic dialer!! 
> 
> Major fib levels should hold--Look for Confluence and Agreement 
> to trade against and trade small in case a position goes against 
> you, so you can hold on to it until you get a retracement back in 
> your direction. 
> 
> If your retirement accounts are low on equities as we have 
> repeatedly advised since November of 99, now may be the time to 
> get some great stocks, but only at major fib numbers- In the past 
> weeks I have posted some of those key numbers on our proprietary 
> client web pages for the indexes. It's easy for you to calculate 
> them on your favorite stocks. Forget value investing-- P/E 
> ratios and such. Put your orders in ahead of time-- Bonsai in as 
> described in the book Trading With DiNapoli Levels" and hold on 
> to your lunch. It could be wild ride!! 
> 
> If you feel this would be of value to anyone feel free to pass it along. 
> 
> -Joe DiNapoli. 
> http://www.fibtrader.com 
> 
> 
> PS. This message is ONLY being sent to traders who have 
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>


 



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