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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 amibroker@xxxxxxxxxxxxxxx, "intermilan04" <intermilan04@xxx> 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 amibroker@xxxxxxxxxxxxxxx, 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 amibroker@xxxxxxxxxxxxxxx, "Fred" <ftonetti@> wrote:
> > >>
> > >> Just keep in mind that a 3% stop loss does not necessarily limit
> > >> losses to 3% ...
> > >>
> > >> --- In amibroker@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx, "intermilan04"
> > >> <intermilan04@>
> > >> > > > wrote:
> > >> > > > >
> > >> > > > > Since I have optimized my system between 1996-2006, I
guess
> > >> the
> > >> > > > > answer would be the same time period.
> > >> > > > >
> > >> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx, "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@xxxxxxxxxxxxxxx, "Fred" <ftonetti@>
> > >> wrote:
> > >> > > > > > > >
> > >> > > > > > > > Are the numbers you posted in sample or out of
sample ?
> > >> > > > > > > >
> > >> > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "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.
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