This strategy really seems counter-intuitive. I realize the people trading this strategy are convinced that they're gaining and "edge" by being on the same side of the Specialist. However, most of the time there are underlying reasons why a stock is out of whack. Yes, it is because there is a buy/sell imbalance and the Specialist might have to accomodate some of that imbalance if there aren't enough shares in his book, but generally a large buyer or seller will reappear soon after the opening print.... most likely a fund working an order. The most importand part of this strategy, as with any, is money management. Cut your losses quickly and let your profits run. Seems to me that if you did the entire opposite and kept strict money management rules, you would do much better. You would miss those "slingshot" trades, but you would be trading with what is most likely going to be the true direction of the stock. Any thoughts?
Actually, we profess the opposite...we put in "stop winners" not "stop losses"...we figure that money management is a no brainer, and that by tape reading correctly, we can take small losses (and then get back in....it helps with the mental side of the game..."oh, I know if I cover, it will be the bottom" and all of that). Feel free to side with the over abundent orders every morning....heck you may be right in the long run....we're just looking for consistency. Test it out, let us know!! Don
better to fade closing imbalances besides, haven't we harassed Don enough?? the guy hardly posts outside of his journal anymore granted, if i lived in vegas i wouldn't post much either
although, whether inadvertant or not, you guys are giving don some props, always calling it dons strategy, dons OO's, etc...
I agree with your reasoning but I think the key issue is your time frame. I prefer to be on the specialist's side in the first 10 -15 minutes of the trading day. Thereafter, it could well be that the buyers/sellers that came in with the big opening orders creating imbalances come back and push the stock further in their direction, but by then the specialist (and you) have covered. Sometimes, the buyers/sellers are aggressive and push their orders immediately in the first minutes of trading, which will cause your losses. But in my experience that is the exception. Oliver
I am not attempting to harass or bash anyone. I'm just merely pointing out a trading strategy that may have some profit potential.
I do use a strategy similar to the one you described, it works well on stocks in play, but I wouldn't recommend trading that way on regular/slow days
Its stressfull, its expensive, it requires watching the market like a hawk every minute, and in the long run you won't make any more money than if you were just swing trading. Of course, buy and hold types say the same thing about swing trading vs. what they do, so its all a matter of perspective and personal goals I guess.
Is there an old/original thread that i can read about Don's opening strategy? I hate to be asking Don about the details this point in time, so if anyone can link me that, i would very much appreciate it Looking for new trading strategies .......
Search back to Don's Openings part 1 and 2....and if you have any questions, feel free to send me an email... Don