this is an excellent discussion of R/T trading, with an immediate reference point (today's charts during trading hours Jan 15th, Tues). unfortunately, there are as many natural forces and traders who are well heeled enough to look for the same "entry based" patterns (whether on the long or short) and consistently do the opposite of what the technical training mores teach, hence the earlier comment by one trader who said "he used to trade flags but was undone over 7 times". Natural forces include: . posting errors and the associated trading firm eating the loss/profit from the error . intentional market (uh, what's a more politically correct word for manipulation) "influencing". whereby a heavy knows and expects that by being a "Tier 1" trader, his actions will be parotted by others . pre-placing the opposite trade to the "tripping trade", hence already getting out as soon as the large movement hits the tape TBW -- trader be ware...
Bought nqh02 at 1623 at 10:02:22 Sold it at 1666.5 at 10:02:53 Bought it because it was consolidating near days high, 1622.5 was a very minor swing high and I figured it would poke into new highs for a few seconds and I'd make 3 or 4 points before it failed. Got in on a stop limit, got into new highs, 1625 or 26 bid and I'm thinking "ok, decent trade" and all of a sudden the bid is in the 30's, I hit that bid, and watch as bid goes into 40's, 50's, 60's and ding, my fill is at 1666.5. Waited for quite a while for the call to bust the trade, checked cme site, checked chat rooms, checked data vendor, finally satisfied that trade would stand. Another note- I wasn't around for the late rally, and I'm not an eliot wave fanatic, but I have studied it prettty thoroughly. As I left my desk today, naz was taking out yesterday's low, and the 45 minute chart was tracing and completing a textbook 5 wave pattern. Once the new low was in and price rebounded back above yesterday's low, nice rally ensued.
mgkrebs, nice one. I had a limit order in but didn't get fill until after the fireworks. I was in the queue 10m in advance but stop orders had priority. At least I didn't have a buy stop go awry... 40-60 pt NQ loss would've hurt. http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=16912434
Hi All, I was waiting almost all day to get on this board and see if anybody mentioned this nice 10:02am (central/Chicago) spike in the NQ. If I read through the rest of this thread, I'll probably see that somebody else already said this, but I'm going to write first. This spike was clearly the result of some unfortunate NQ traders using STOP orders (as opposed to STOP-LIMITs). The real spike only occurred in NQ, not ND and QQQ. Okay, there was a minor (~10pt) increase in ND at the same time, but looking tick by tick on Bloomberg showed it had to be stops. after the first 1642 trade, a bunch of trades of small sizes (1 to 3 contracts) go off pushing it up to almost 1650. Then a burst more, and another and another. Some sellers got in there selling a good chunk at 1668 and higher (on a downtick), with more trades going up to the mid 1670s. Even as trades were going off at 1660+, there were reasonable ones going at 1645 intermixed. A few seconds later and it was all over, with reasonable trading back down in the low 40s. If anybody's still using stop (market) orders, or market orders of any type, may I respectfully suggest you go to limits or stop-limits. If you're worried about missing the fill on a heavy move, then be aggressive on it. I.e., say you're short and you want to put a stop at 1641. So put the stop there, and place the limit at 1645 or something. Most likely, you'll be filled at 41 or 41.5 or something, but in a case like this, you'd contain your loss. At least a few somebodies ate it on this one -- a quick 30 point loss, even on one contract ($600), stings. Happy Trading all.
I.e., say you're short and you want to put a stop at 1641. So put the stop there, and place the limit at 1645 or something. Most likely, you'll be filled at 41 or 41.5 or something, but in a case like this, you'd contain your loss. The problem with stop-limits in exiting a position is that what happens if the market takes off past your limit of 1645? You're short, your stop at 1641 is hit, but then the market takes off. The next print is past your limit or there were other orders in the queue before you. Your limit prevents you from being filled. Say you would've been filled at 1650-1660 somewhere. Bad slippage, yes, but now all of a sudden the market is up 100+ points and you're sitting on a huge loss. I only use stop-limit orders in initiating a position. If there's too much slippage then that adversely affects my risk/reward ratio and I'd rather pass on the trade.
I think basing your trades on tapereading can be very dangerous. I cant tell you how many time I've seen large prints go off at the offer price only to see both the offer and the bid drop simultaneously. The specialist palys all kinds of games and once the books are open next week it should get even moe interesting.
Oh by the way in reference to flags I read in a traders magazine a couple of years ago that flags work about 50% of the time.
***I think basing your trades on tapereading can be very dangerous. I cant tell you how many time I've seen large prints go off at the offer price only to see both the offer and the bid drop simultaneously. *** If you can't use the tools, don't blame it. Tape reading IS 60% of NYSE trading right now, the more you trade the stock the more familiar you will be with specialist action. No top tier NYSE trader can get away without a strong tape game. We will see what the open book does.
<i>Glad to see you stock traders also finding that flags do not work anymore (anticipating or otherwise!) </i> Its called being in the middle of a range. Dont pick up the first woman you meet at the office party. Have a bit of pride in yourself! Be a bit discriminating.