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@yahoogroups.com, Yuki Taga <[EMAIL PROTECTED]> 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@yahoogroups.com, "Fred" <ftonetti@> wrote: > >> > >> Just keep in mind that a 3% stop loss does not necessarily limit > >> losses to 3% ... > >> > >> --- In amibroker@yahoogroups.com, "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@yahoogroups.com, "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@yahoogroups.com, "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@yahoogroups.com, "intermilan04" > >> <intermilan04@> > >> > > > wrote: > >> > > > > > >> > > > > Since I have optimized my system between 1996-2006, I guess > >> the > >> > > > > answer would be the same time period. > >> > > > > > >> > > > > --- In amibroker@yahoogroups.com, "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@yahoogroups.com, "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@yahoogroups.com, "Fred" <ftonetti@> > >> wrote: > >> > > > > > > > > >> > > > > > > > Are the numbers you posted in sample or out of sample ? > >> > > > > > > > > >> > > > > > > > --- In amibroker@yahoogroups.com, "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 SUPPORT {at} amibroker.com For other support material please check also: http://www.amibroker.com/support.html Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/amibroker/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/