Don's Openings Pt. 2

Fletch · May 9, 2002

You just gotta love these openings when hundreds of traders all head for the door at the same time. Opening orders were great a year ago... now it's just another diluted strategy used to fill training classes and churn commissions. IMHO.

nylord1 · May 9, 2002

2 fills net .20

Don Bright · May 9, 2002

Originally posted by Fletch
You just gotta love these openings when hundreds of traders all head for the door at the same time. Opening orders were great a year ago... now it's just another diluted strategy used to fill training classes and churn commissions. IMHO.

I'm so glad you think that (perhaps you will help "unclutter" the openings), since our people are doing very well with them. We have added the automation, and the traders are making serious money. With the millions of shares trading, and the thousands of stocks, it is virtually impossible to dilute this technique. If and when it doesn't work, we will go onto something else. This strategy has been working for decades, sorry if you have trouble with it.

I'd be interested in hearing what you feel is making serious money for traders these days....we can all learn from one another. Unless, of course, you simply like to attempt "bashing" for lack of something else to do.

Don

hsanson · May 9, 2002

Don's opening strategy works, I myself backtested it manually with a basket of around 20 stocks over a 1 month period and the average winners where around 60-70%.

This strategy is basically similar to the opening gap strategy used by Nasdaq daytraders.

Remember, opening strategy bets on extremes and hopes for a return to the mean. If it fails you take the loss, it you win just keep the winner until the mean is reached or your profit target is reached.

I will try to further backtest this strategy going back in time for 2 more months to see how it performs, but due to the nature of this strategy it has been a winning strategy since it was invented (with proper money management, of course).

Thanks Don for contributing trading ideas to this forum.

Don Bright · May 9, 2002

I appreciate the support, it gets a bit boring hearing from the (few) naysayers.

There was a lot of backtesting done by one of the magazine contribtors a couple of years ago (TASC), and they did well even though they had a major flaw in their thinking...they were not adjusting for fair values, etc. Trading on the same side as the NYSE specialist is always a good way to go, and the gaps on the OTC will work based on simply pullbacks.

Thanks again, and keep up the good work!

Don

mgkrebs · May 9, 2002

4 wins out of 5 fills. Net of 67 cents after comish. The loser was SGP which I am beginning to dislike- it flushed down 19 cents from the open, got out about half way back, lost 12 cents and it went straight up another 43 cents from my exit. Coulda been 5 for 5 pretty easily.

Don Bright · May 9, 2002

Originally posted by mgkrebs
4 wins out of 5 fills. Net of 67 cents after comish. The loser was SGP which I am beginning to dislike- it flushed down 19 cents from the open, got out about half way back, lost 12 cents and it went straight up another 43 cents from my exit. Coulda been 5 for 5 pretty easily.

Good Job!!! Keep it up....

To everyone: OK, I go in to the hospital tomorrow at 5:30 AM....so do well, and I'll be back to you sometime next week. Make lots of money!!

Don

rtharp · May 9, 2002

Originally posted by Fletch
You just gotta love these openings when hundreds of traders all head for the door at the same time. Opening orders were great a year ago... now it's just another diluted strategy used to fill training classes and churn commissions. IMHO.

Fletch

I remember when we met at the Online Trading expo. Yes indeed the market was better a year ago for this. I wasn't very happy to find it on a thread and get discussed to a tee, then other traders start posting spreadsheets and such. Which stocks are working!!!!! and which ones they get screwed on. I've noticed that the gaps are less than they used to be before these threads really started and I have to also allow for less profit. Unforunately this is the general nature of the market. Everyone flows to what works...it eventually doesn't work........a lot of traders start to lose money and quit the strategy than eventually a strategy works again as less are doing it.

Nature of the market. There is nothing you can really do about it. With message boards and the internet the cycles might be a lot faster now though. The dilution of strategies is why I am now VERY protective of things I do in this marketplace when I find something is working really well. I'll teach traders in my office ONLY and have them sign non-disclosure agreements about what is going on.

Robert Tharp

Gansoro · May 9, 2002

Originally posted by lescor

Fair value numbers will probably be different for everyone, because not everyone pays the same interest rate. As long as you're consistent, I don't think it matters. I use the number published by programtrading.com rather than calculate it myself.

I take the current futures price (emini 5 minutes before the open) minus the previous day's cash close. I then subtract the fair value number from the difference. I take the result of that calculation and divide it into the spx cash price and express it as a percentage. This tells me how much the market is opening up or down from where it should be. I then take that percentage and multiply it by the stock's closing price, then multiplied by the stock's beta to arrive at a fair value for the stock, in other words, where it should open according to the market. Then I multiply my envelope by the stock's fair value and I arrive at my buy/sell prices.

In a big gap day, I've already accounted for the gap in my fair value prices, which is why I use the same envelope everyday. With a 1% envelope, I average a 9% fill rate on my orders, and it's surprisingly consistent. The market opened up 1.62% today, the highest I've seen since I started keeping this stat (2 months), and I was filled on 13% of my orders.

Corey

Corey,

Just a clarification... on your final calculation, I think you made a mistake in your explanation. When you said, "I take the result of that calculation and divide it into the spx cash price and express it as a percentage." I think you meant, "I take the result of that calculation and divide it BY the spx cash price and express it as a percentage."

Is that right? In the first instance, the "percentage" would have been a huge number. Right?

mgkrebs · May 9, 2002

Originally posted by rtharp

Fletch

I remember when we met at the Online Trading expo. Yes indeed the market was better a year ago for this. I wasn't very happy to find it on a thread and get discussed to a tee, then other traders start posting spreadsheets and such. Which stocks are working!!!!! and which ones they get screwed on. I've noticed that the gaps are less than they used to be before these threads really started and I have to also allow for less profit. Unforunately this is the general nature of the market. Everyone flows to what works...it eventually doesn't work........a lot of traders start to lose money and quit the strategy than eventually a strategy works again as less are doing it.

Nature of the market. There is nothing you can really do about it. With message boards and the internet the cycles might be a lot faster now though. The dilution of strategies is why I am now VERY protective of things I do in this marketplace when I find something is working really well. I'll teach traders in my office ONLY and have them sign non-disclosure agreements about what is going on.

Robert Tharp

Die, thread, Die!!!!!!!

seriously, I have tried to be a lttle circumspect about comparing notes on which stocks are working or not. I think everyone should do their own due diligence and backtesting. The most liquid names, it probably doesn't matter, but some are certainly going to be impacted by numbers of traders using the same technique.