Quote from OldTrader:
Really, you need to provide some detail to make this a credible statement.
A stop order (not a stop limit order) will always "work"....you just may not like the execution.
When I say "always", I'm not counting a situation where the market places an artificial set of circumstances into the rules. For instance, if you're trading a market which has limit moves...like most of the commodities for instance....then it's possible you would not be executed prior to the market reaching the limit move. Ouch! So if you're trading markets that have limit moves, you may want to consider that, consider what you can do if a limit move occurs. And by the way, there are limits to the stock market...frankly I've forgotten now what they are.
Another possible exception has to do with your trade software. If it is set up incorrectly, or it fails, or it malfunctions in some way, then you may have a problem as well. Throw in there internet problems, etc etc. All things to consider when contemplating what your risks are.
But personally, I think buying out of the money puts is a very expensive solution to the problem.
OldTrader
Most people do not see what is going on in the markets.
Once a person has the displays and the strategy coding and a way to keep the record, then he can debrief and rexamine what happened.
Usually if a person does not know what to look for or where to look, no observations are possible anyway.
With respect to the four common games played in the commodities markets, what happens when some of the games are taken off the table? What happens to the unsophisitacted retail trader who is using some betting strategy and the usual set ups and a quasi money management whatever.
As the market moved away from the testing of limits and the retesting of those limits. A lot of people were involved in applying their SOP under conditions where SOP wasn't remotely workable.
Any one who understands opportunities and risk or its absence is going to tear new ones for an astonding array of conventional people.
A person must monitor the markets and behave (act) accordingly. Lets deal with those who are able and what they see.
The "protection" of the game players is there in a normal way. It can be read and it is taken into account. A T&S on 50 plus and a T&S on 1 or more show the normalcy.
The DOM is showing the games in situ and the indicators and signal generation occurs with normal periodicity.
The leading indicators are rolling along quite well and sequencing is operational
The mode ratio of hold and occassional reverses is SOP. THe single tick range tick charts and their restart timers are working SOP as well. cremeing turns is SOP.
BUT then there is an almost imperceptable decay in the Q of the monitoring and the routine. WWT's show up and so do the quant's favs anomolies. Tricky riffles across the system.
black water fingers pushing across the chop from the crosswinds. The air is not smooth and the telltales are scurilous in their independance giong up the mast spreader set by spreader set. something is up even though it can't be felt in the whell or seen on the aft Q wave. But there is more noise coming down the windward side of the hull and the and the goose neck was waking up even with the boom vang tight as a drum.
What first rattles the market was playing around for 15 minutes even though no real bar extremens were coming into the picture.
It was defintiely time to be sure all the gear wasn't fouled or foulable and all lines needed to be rehearsed for use. I would have unclipped my bos'um's knife and drained my deck boots.
Get out the roller reffing handles and drop the coils from the cleats.
Then no one was playing at the thousands place holder
And the DOM totals were not up there where they were.
The prem and offset were on the mark ....and not coming off the mark very often.
The single digit people were blithe. On the T&S on the DOM and on the dwell on the Tick timing clocks.
The first move was played by all and there was hesitation on new protection. Thin protection was showing on the new holds.
Dummies abounded ((contrarians) to keep the smart money filled.
The usual HVS BUT too much for so little effort.
The weatehr has set in and it is dark midday and the water is getting wet with spray falling on it from the dominant wind. This is going to be a line squal and it is going to be relentless once the games stop.
four digits long over.... three digits are out ....two digits are either smart or dumb and both are stuck in place and unprotected. The DOM is thin , there are no walls, and the tick clocks are restarting so fast it is like they can't get more than one or two digits to show.
The offset is closing down and crossing neutral and going further......
Plain vanilla cascading.... All smart fills are dumb markets.
10 point bars and accounts are being closed as much as any trading technique is being used.
watching the 50's...looking for some 250's
Sooo cool.
The DOM hit totals of 700 on each side. Tick clocks were meaningless. Indicators (MACD , STOCH's) shut down right away.
The stretch- squeese was upside down by more than the premium or twice the premium.
Tight stops built the surge wave that then intercepted the loose stops and only smart money was opposite the stops and smart big money left so early it was unbelievable.
Profit segment holds were as large as market spec margin levels. Bars were running at 25% of margin.
This is a simple definition of small money accounts being wiped immediately; then money managed accounts being wipes second and only people who were intially sidelined surviving.
There is no one available to take the opposite side of protection once the DOM is thin and there are no walls put in by three and four digit people to stop the cascade.
There is no way a front runner is not going to take the whole ride and in big chunks. you never get out of coarse analysis "continuation" and you only watch medium and fine leading indicators for the fun of the experience. Having broker margin instad of market margin simply means that the leverage is about four times greater and a segment turns out to be four times broker margin.
27FEB07 was a very cool day and it showed how and why stops do not work and whole small accounts are taken out and then money managed accounts are taken out.
Another example is the Nitro blow up at the end of 2006. It may still be on the chat room transcripts. This is more the slow freeze type thing compared to the faster stop strategy failure type blow out.
To have a display and have a way to read it is important. It is much more comprehensive than any one of the 12 stop strategies I documents a while back. It is probably about the same as having 12 stop strategies understood and documented for reference.
So starting with a display and a routine for reading it, there you are sitting and looking at the screens and logging and handling your accounts.
You get the whiff. It is there.
All in and on the right side. It is a simple situation.
The BLATANT nature of that whiff and then the WWT's
People leaving the scene of the accident made the accident.
Having the display and having the routine is what makes trading transparent.
When it doesn't add up it is going to be an accident. On a one way street.
When there is nothing there to stop something it is not going to be stopped. Harlin on the Eiger.
This is viewing the market. Trading the market during a market accident is the greatest money making experience to be had. Some people had their greatest day. They were on the right side of a broker margin times 4 single profit segment. This could account or half the profit of the day in this case. This all in , no stops trading (as mentioned, stops do not work during accidents) is what epitimizes retail trading at it's best.
All out sentiment and extreme market pace was a direct result of people being in an accident where they were what caused to high profits to be made by others. Their approaches and beliefs are the causal factors for their demise on that day.
It is not necessary to change one's ways as a trader. But it is necessary to take the steps to be able to see the markets. And it is necessary to learn to read the markets.
right now at this point there are a lot of lucky people and that is simply because they are the people who were sidelined at the time the accident began and they sat and watched it.
We flipped the camtasia on and we recorded a narration on another machine (laptop) as part of the day. We also debriefed.
Altucher, a quant, calls one of his QQQQ strategies the QQQQ Crash. The thread is entitled Market Crash. This is all the convnetional orthodoxy naming things. It is a statement of the emotions of the approaches. Fear, anxiety and then anger rules these sorts of traders.
When a person starts trading without stops, what could it signify?
In my opinion, it signifies that he has a way to display the market and a routine to follow for trading.
A trader works up to a place where he can operate in anticipation of the market while trading in NOW and he has a completely automated system behind the green curtain. In BigHog's terms this is the end game.
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