Stops
- Thread starter Humpy
- Start date
Of course it is good trading practice, in this case by the specialist, to try and lower the prices to a better level for a buy. And of course, close stops will be hit.
However this observation is not usefull in practice: how would you know whether the breaking of a certain level, at which you (after considerable thought) placed your stop, is just a 'manipulation' or a real breakdown to a new range?
My point is: of course you should not place your stops at obvious levels close to the current market, if at all possible. But if there is a good reason to place it there, you have no choice. A mental stop will be 'taken out' as well, it just gives you more time to doubt your previous decission. Which I think is BAD!
Ursa..
You know because the stock immediately moves from that area and steadily increases. If the specialist knows the stock is going to go up he will buy YOUR SHARES at the lower price and make his profit on the larger order he has in the bag. If everyone just kept mental stops this could not happen because the specialist would have no idea of how much selling supply was at that price level.
Your theory only works if there is a difference between mental- and actual stoporders. The only difference you might assume is that stoporders are visible to the specialist. Maybe on some exchanges they are, but to my knowledge in general stoporders that are native are not visible to anyone, except some sysop. Non-native stops are on the server of your broker, and maybe there's a leak there, but it would be highly irregular.
Of course you know that a move-down was a manipulation by the specialist when the prices 'immediately moves from that area and steadily increases'. But that is after the fact. Anyone can tell that after the fact. The point is, how do you know before it happens? You can't, hence you must use a stop.
Or are u suggesting we don't use a stop and only pull the trigger when the prices don't come back again? Come on...
Ursa..
Can anyone confirm this? I just fail to believe it.
A stoploss order will only enter the 'book' when it is triggered, either as a market- or a limit-order, depending on the type. Before they are triggered they are kept on a separate queue and watched for the trigger to happen. This is about native orders.
Orders that are not native can be simulated by your broker. IB allows you to enter stoploss orders on about any market, including options (or NASDAQ), and will simulate them when they are not native for the exchange.
Of course in a technical sense there are always ppl with access to the order-queue systems, but they will by regulation not be allowed to trade on that info. It would be ridiculous if any party involved would have access to these orders, let alone the specialist, who has a special role in the trading theatre.
Please tell us on what archaic exchanges you think the stop-orders are visible to the dealers, so I can avoid that one.
And if someone knows some facts about this issue, please chime in.
Ursa..
Actually, limit orders that are sent minutes in advance are problematic because the mm/specialist has time to set up his moves....if your going to use limit orders to exit a position....put it in at the last minute....so he is too busy to "mess" with it....but how many limit orders that are placed on the books hours ahead of time...when the price is not too close to your exit point.....will stop one cent (literally) stocks here btw, from your limit order....you need to follow the market...like a hawk if you have any open positions....and surprise the specialist as much as possible....otherwise you will get screwed on price/fill/execution....another thing if your limit order gets filled....the market is going far past your exit point.....by atleast 10 cents on a 30 dollar stock if it has been sitting on the books for awhile.