Strange Coincidence?

Alleppian · #1 21st August 2006, 12:43 AM

Hi '
I would like to get opinion from senior members regarding the Stoploss.
I have this experience of giving the stoploss order for the day to my broker as I am not a day trader and won't be sitting in front of the pc all day.A no. of occasions it happened to orders esply placed early in the morning ,the price comes down to a limit exactly to my stoploss level and goes up. I thought the stoploss order amount is hidden and nobody can see it.But this gives me some doubts that i would like to get opinion from. My question is that Is there any software or is it possible to see these stop loss price so that somebody can manipulate it ? Strangely it occured in orders placed early in the morning.
Hope to hear from seniors
Alleppian

aca_trader · #2 21st August 2006, 12:48 AM

Quote:

Originally Posted by Alleppian

Hi '
I would like to get opinion from senior members regarding the Stoploss.
I have this experience of giving the stoploss order for the day to my broker as I am not a day trader and won't be sitting in front of the pc all day.A no. of occasions it happened to orders esply placed early in the morning ,the price comes down to a limit exactly to my stoploss level and goes up. I thought the stoploss order amount is hidden and nobody can see it.But this gives me some doubts that i would like to get opinion from. My question is that Is there any software or is it possible to see these stop loss price so that somebody can manipulate it ? Strangely it occured in orders placed early in the morning.
Hope to hear from seniors
Alleppian

Market makers can see where are the stops and the buy and sell orders and sometimes they run the market in a direction if a number of stop losses are concentrated around a single point.

In addition, the big players also play this game despite not seeing the SL orders as most of the SL's are placed near the Close/High/Low of the previous day or High/Low of 3 days' bars or 5days' bars. The big players using knowledge of this phenomenon do run the trade in the opposite direction of their intended direction to shake the weak hands and clear the path for themselves.

Best Regards,
--Ashish

Alleppian · #3 21st August 2006, 01:18 AM

Wow !
Thanks for that quik reply Ashish. That was really new information for me.Hope others also will be care ful next time
Thank you

kuldeep49 · #4 21st August 2006, 10:52 PM

Quote:

Originally Posted by aca_trader

Market makers can see where are the stops and the buy and sell orders and sometimes they run the market in a direction if a number of stop losses are concentrated around a single point.

In addition, the big players also play this game despite not seeing the SL orders as most of the SL's are placed near the Close/High/Low of the previous day or High/Low of 3 days' bars or 5days' bars. The big players using knowledge of this phenomenon do run the trade in the opposite direction of their intended direction to shake the weak hands and clear the path for themselves.

Best Regards,
--Ashish

This happens a lot and is due to the fact that Technical Analysis is sometimes a self fulfilling prophecy and a lot of stops get bunched together. Market makers can see where they are bunched & move the price to mop up these. Someone once suggested that one should keep a notional stop loss, but if your notional SL is based on same TA principles, then again as the price goes down one sells.

One thing I have observed is that most SL's, in an uptrend, get triggered on the day that the stock makes its move.

Haven't been able to figure out a solution. Maybe Traderji can help.

cooltetra · #5 21st August 2006, 10:57 PM

I have a solution to it though not suggested if you cannot use it mechanically and unemotionally, no hard coded stop loss use mental ones. But respect them as if they are the real hard coded. Also can't be employed in case you are leaving the system even for some time. In case need arises, that you have to leave the system, do not leave without having an actual hardcoded stoploss.

Best Regards
Coool.

Traderji · #6 22nd August 2006, 07:51 AM

Stop Loss is another sensible-sounding concept that is much easier to acknowledge than actually to execute when real money is on the line. No one wants to exit a trade with a loss. They don't want to lose money. More importantly, they don't want to admit they were wrong. You can always think of many reasons to hold on to a losing trade. You can hope that the market will suddenly turn around and give you a profit instead of a loss.

Since the markets are mostly random, the best trading methods will always have numerous losses.

It is precisely because correct trading methods invariably generate many losses that it is important to keep the individual losses small in relation to the overall size of the account. In order to keep trading, you must preserve your capital. If you can keep trading in the direction of the trend, the big profits will come. However, if you take too many large losses, your capital will be wiped out before you can enjoy the big profitable trades.

The laws of probability insure that regardless of your approach, you will inevitably suffer some long strings of consecutive losses. If you are risking too high a percentage of your account on each trade, before long one of these unavoidable losing streaks will blow you away. Keeping losses to about one percent of your account size is optimal. With smaller accounts, the percentage will have to be larger. Five percent on one trade is probably the highest prudent level of risk.

An excellent way to set the trailing stop percentage is using the daily average volatility of the stock. To determine the average volatility compute the average daily high-low price range for the prior month, multiply by 2, and then divide the result by the current low price. This will give you the percentage stop based on volatility.

ksganesh100 · #7 22nd August 2006, 09:04 AM

Thanks traderji for your lucid explanation of trailing stop percentage.

I have been reading about different methods of setting trailing stops. Some of them are as simple as setting a stop a fixed percentage below the closing price. Some of them are a bit more complex like setting volatility stops (Price - 2 X ATR). Others focus on setting stops using indicators and moving averages. From your posts, I know that you prefer using the low of the last three days as your stop.

It would be great to know what you think of the other methods and why you choose to set your stops below the three day low. Thanks again.

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