Postscript: I did not mean to say that 3% stop loss is the universal best solution. I meant that having a stop-loss order is the best way to preserve your capital.
--- In [email protected], "intermilan04" <[EMAIL PROTECTED]> wrote: > > 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 [email protected], Yuki Taga <yukitaga@> 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 [email protected], "Fred" <ftonetti@> wrote: > > >> > > >> Just keep in mind that a 3% stop loss does not necessarily limit > > >> losses to 3% ... > > >> > > >> --- In [email protected], "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 [email protected], "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 [email protected], "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 [email protected], "intermilan04" > > >> <intermilan04@> > > >> > > > wrote: > > >> > > > > > > >> > > > > Since I have optimized my system between 1996-2006, I guess > > >> the > > >> > > > > answer would be the same time period. > > >> > > > > > > >> > > > > --- In [email protected], "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 [email protected], "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 [email protected], "Fred" <ftonetti@> > > >> wrote: > > >> > > > > > > > > > >> > > > > > > > Are the numbers you posted in sample or out of sample ? > > >> > > > > > > > > > >> > > > > > > > --- In [email protected], "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! 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