Don's Openings, Part 6 2003

[Don Bright]

Quote from Oz Cillator:

Thanks Don for your comments.

Here's a problem as I see it. You're executed on an order and are now long a stock that opened down $1. Stock immediately trades 30 cents lower with nary an uptick. Now I've read your posts before where you warn about "shakeouts" and suggest hanging on for the rebound. But, without a crystal ball, how can you know when it's a "shakeout" and when the selling is real and serious (like points more to go on the downside). Other times you seem to recommend cutting your losses and "getting back in the trade at a better price". Could you please address what seems to be a contradiction. Thanks.

Sure, be glad to. The primary thing to remember when doing these Opening Only orders, is that the NYSE Specialist will be on the same side as you are. This generally means that we should be able to "get out" with a profit. On rare occassions, we can get stuck...and then we have to "tape read" the overal market, sector, stock itself, and the size of trades taking place (to figure out who is selling, and who is buying).

At this point, we have to make our best "educated guess" as wto whether or not we can "get back in" at a better price, bite the bullet, close, and be prepared to actually "get back in."

We're shooting for an 80% batting average here, not 100%....right?

Again, I wish there was some definitive answer, but as in all of trading, there isn't.

Don

 

[cashonly]

17 fills:
10 winners
7 losers
62 cents total

Let 2 losers slip about 5 cents more than I should have each.

 

[Don Bright]

Used a 1% envelope, only got filled on BMY...made $140 (7 cents)....

Don

 

[big_jdez]

Made .20 on COF but only because there was a premarket ISLD offer there that I hit to cover. Used an .8 envelope.

 

[Ron In-a-sauna]

the best piece of advice i was ever offered, from an older trader at bright, was also the simplest..."if your having trouble with news stocks, dont trade them" enough said.

my thinking is it boils down to risk reward...news stocks are a high risk high reward proposition, so if you are rewarding enough from them to make it worth the risk, go for it. if you are not, dont, or maybe size down to 100s for now until you learn how to trade them... my .02

 

[ManhattanTrader]

Don,


I remember reading somewhere in one of your old posts that you manage exits based on 1st standard deviation, etc. I can't find that particular post, can you refresh my mind a little bit please?


thanks in advance

 

[Don Bright]

Quote from ManhattanTrader:

Don,


I remember reading somewhere in one of your old posts that you manage exits based on 1st standard deviation, etc. I can't find that particular post, can you refresh my mind a little bit please?


thanks in advance

Hi! I'm afraid that once again, a "little bit of knowledge is very dangerous"....the standard deviation discussions relate to intra-day volatility plays in our core stocks, not the opening only strategy. A little "mixing and matching" of concepts....look more for "slingshots" and "shakeouts" for the openings exits. Tape reading is very helpful when you get filled on only a couple of stocks, the "mechanical" response is valuable when you're in (too) many stocks at the open.

I assume you're in Manhattan...so come on by the Online expo....we're doing free shows this time, and will be happy to answer all your questions.

Don

 

[cashonly]

Arrggghhhh!

Working on my latest automation app and I screwed up. I left the percent envelope at 4% instead of .7% and got filled on NOTHING. I have it at 4% so I WON'T get filled while testing.

Frustrating part of getting an automated opening order program tested with live data is that I only get one chance a day. And I blew it today!

Oh well, on the bright side, I didn't lose any money

Cash

 

[vikana]

Just curious: how long to you keep your orders live if the specialist haven't filled them ?

I tend to cancel about 2 mins after the open, but was curious for other feedback.

 

[Don Bright]

Quote from vikana:

Just curious: how long to you keep your orders live if the specialist haven't filled them ?

I tend to cancel about 2 mins after the open, but was curious for other feedback.

Once again, it's more important (in my mind) to look at the pre-opening indication...rather than the time elapsed without opening the stock. Adjust your opening only prices based on the indication, and you should be ok.

Not to worry, Cash, I used .75 and I got filled on zero/nada as well. But, I did buy some bullets on LEH, and made a few bucks......

Heading to Atlanta this evening.....hope to see everyone there this week for the technology expo in our office.

Don