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Strategies & Market Trends : Dow Jones Futures -- A free paper trading service
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To: David who wrote (65)1/22/2000 9:11:00 AM
From: Patrick Slevin  Read Replies (1) of 797
 
Seems 50 point swings might be considered close stops these days. For example if the Globex Session shows the SnP gapping up perhaps 8 or 10 points and there was news about one of the Dow Stocks that drives it up a few points on the Open the Dow could Open High and then sell off to your target. It's happened, quite often with IBM earnings (as I recall) for example.

Would you use a Stop based on recent volatility or perhaps as a percentage of the "value" of the DJIA or do you consider using 50 because it's a reasonable random number? I don't have any suggestions, I'm daytrading and might see that the 50 will or will not work because I'm here watching it.

The way I developed my trailing stops was to backtest using various ones, and deciding what I could live with. For every 10 points on the SnP the risk is currently $2500 per contract. So before I set the Stops in mine the largest drawdown was around $30,000, perhaps higher. It was only on one instance, but it was enough to concern me. In the case of the SnP stops of around 20 points or so are pretty wide. Looking at the DJIA, though, it seems that some days you could walk away for a cup of coffee and when you return there has been a 50 point swing.

Like you say, however, a stop is necessary somewhere. 50 points is as good a place as any I suppose.
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