Using stops on listed stocks - mechanical or mental?

learninglisted · Jul 31, 2003

I'm trying to get used to trading listed stocks and am having a devil of a time with certain specialists, i.e. MMM.

I believe in going with the trend and not against it, and as such I would like to use buy stop limit orders, which of course are placed at a price higher than the current price.

My fear is that the specialist will see my order and the other buy stop orders, and move the stock up to my price level, sell me the stock, and then dump the stock lower leaving me and others holding the bag.

My question for you experienced and successful listed traders is:

Do you use mechanical or mental stops, and does it depend on the stock?

Thanks

jem · Jul 31, 2003

Yes they will get your stop if no one is on the floor keeping them "honest".

RAMOUTAR · Jul 31, 2003

"ALWAYS MECHANICAL STOPS"

I believe people should refer to "mental" stops as "heart" stops instead. If the "heart" wasn't in the way, the "mental" stop would work, that's the problem with mental stops, the brain doesn't put them in or hold them back, the heart does.

learninglisted · Jul 31, 2003

Quote from RAMOUTAR:

"ALWAYS MECHANICAL STOPS"

I believe people should refer to "mental" stops as "heart" stops instead. If the "heart" wasn't in the way, the "mental" stop would work, that's the problem with mental stops, the brain doesn't put them in or hold them back, the heart does.

RAMOUTAR,

I'm greatly enjoying your other threads, FWIW...

Now, if you always use mechanical stops, aren't you often left holding the bag? How do you defend yourself against the specialist taking out your stop and then lowering the boom on you?

RAMOUTAR · Jul 31, 2003

Quote from learninglisted:

RAMOUTAR,

I'm greatly enjoying your other threads, FWIW...

Now, if you always use mechanical stops, aren't you often left holding the bag? How do you defend yourself against the specialist taking out your stop and then lowering the boom on you?

Glad you're enjoying the posts. I have lowered the number of those events by only having 8 NYSE stocks in my universe / stable of 28. I posted a similar response here:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20285&perpage=5&pagenumber=3

I scale out more on NYSE stocks knowing that the specialist is going to smack me. The price of "my mental" stops carry a far greater price than the specialist's wiggle.

learninglisted · Jul 31, 2003

Quote from RAMOUTAR:

Glad you're enjoying the posts. I have lowered the number of those events by only having 8 NYSE stocks in my universe / stable of 28. I posted a similar response here:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20285&perpage=5&pagenumber=3

I scale out more on NYSE stocks knowing that the specialist is going to smack me. The price of "my mental" stops carry a far greater price than the specialist's wiggle.

Thank you for that link and your comment.

Trading listeds has thus far proven to be extremely frustrating. It seems that I never get filled unless the stock goes against me immediately following! And Direct + doesn't seem very useful either. I'll route there over and over, sometimes out of market, and still not get filled! That new five cent rule is just insane...

Aw well, live and learn.

maxpi · Jul 31, 2003

I have seen the price come down, down, down, taking out everybody's loss stops and then after it finally gets to my perfectly placed lose stop and takes it out, price goes other way. I keep stops on my own computer 100% of the time nowadays.

That shows that backtesting and going forward are two slightly different things, in backtesting my stop was not visible to the market and going forward it has to be the same way.

AmbushHillbilly · Jul 31, 2003

Quote from learninglisted:

Do you use mechanical or mental stops, and does it depend on the stock?

Thanks

Haven't traded stocks intraday for awhile, but used to 6+ hours a day.

The specialists will run stops if they get the chance. Mostly, this will happen during the midday lull. Wouldn't you stroll across the room and pickup a $100 if it was there and you had a minute?

I used to only use hard stops if I had a decent position going and HAD to go to the bathroom. Three times out of four I got back and they had hit my stop and gone right back to where they were. I quit going to the bathroom.

FWIW: I've never been great at intraday stocks.