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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Michael L. who wrote (2439)	1/25/1998 10:48:00 PM
From: steve goldman	Read Replies (4) \| Respond to of 4969

I find it interesting that your firm, Datek, is willing to take stop orders on the NASDAQ but NOT on NYSE. Afterall, the NYSE is the only exchange with a "specialist" who can manage such stop orders and effectively make the market in a stock. Infact, rules regarding stop orders exist on the NYSE and not on the NASDAQ which is why most firms only take NYSE stops and not NASDAQ. Do you have this backward by anychance and simply mistyped it? If you are correct, then they must feel that they have a chance to make a market and perhaps an 1/8 or 1/4 on a customer stop order on the nasdaq because it is not a centralized marketplace, while if they took it on the nyse, they could only protect you by giving your order to the specialist, which would incur floor brokerage limit charges and not allow them to act as principal, make a market or route to a market maker/principal. For instance, a stop order to sell xyz at 10 becomes a market orde when the stock prints at 10, not simply bid at 10. Thus, the stock could be 10 1/8 x 10 1/4, drop to 10 x 10 1/8 but never print lower than 10 1/16...you order, stopped at 10, never gets executed, never becomes that market sell order until it PRINTS (not just bid) at your stop. You put in a stop on nasdaq stock to sell 2000 abcd stopped at 10. This firm you are talking about takes it. Since there is no rule on the nasdaq, lets say a stock is 10 1/4 bid by firm xyz offered at 10 1/2..you have a 10 stop....your firm that you gave stop order to short sells the stock at 10 1/4, knocks down the offer, it now becomes 10 bid, now they take your 10 stock into their account to cover their short at 1/4....the queston is, at your firm, can they take it in when it prints there or is simply bid there? The distinction could be made meaningless because they could knock down the 10 1/4 bid selling short (mm's don't face short sale rules to the same degree as indiv. investors) and then when its 10 bid, simply sell 100 shares at 10 to now have that print at 10 that lets them take your piece in at 10.... As you can see, without a centralized market maintained "nuetrally" by someone like a specialists, it can get ugly. But then, we know that already as this is not too much different on any order, market or limit, stop or stop limit, when you are dealing with a market maker/principal firm. Its not the order, its the firm. At my firm, since there is nothing hard and fast on how to work stop orders on nasdaq stocks, I need explicit directions from clients..."sell abcd at the market if it drops and PRINTS at 10..." or sell abcd at the 10 limit if it ever drops and becomes bid 10".....Since we don't make markets, we would never knocked out thebid so we could cover a short position in some firm inventory account. I didn't mean to make that sound self-serving but my point was that its not the order or the stock or the market, but the firm which has the order. Are you sure you didn't have the backwards in error? Most of the time firms take stops on nyse and amex and not nasdaq to avoid conflicts etc. regards, steve@yamner.com

To: Michael L. who wrote (2439)	1/26/1998 8:46:00 PM
From: Coyoti	Read Replies (1) \| Respond to of 4969

<<a few words about adjusting the stop loss. You got lucky and created position at the beginning of the move...Are you moving your mental stop loss constantly with price? >> Hi Michael...interesting question.....from my experience, you have to determine a target before you enter a trade...actually, you need to create a PLAN before you enter the trade.This will hopefully get you relying on your intuition and sensitivity, vs. Luck. How's the saying go...Luck favors the well prepared? Oldtimers say, plan a trade, then trade your plan. This might be a quick strategy when you see an opportunity, or one you develop as you watch a stock and wait for the play to meet your requirements. It is always developed around past performance, and what you might believe to be PROBABLE <vs. possible> future performance . What i take into account is current Market sentiment, current stock sentiment, quality of news and how recent it is, the stocks current trend in a daily, hourly and 10 minute framework, and it's recent high's and lows. If your plan includes an entry and an exit price, as well as a strategy that covers what you will do based on movement either way, you are in a much better head set patience-wise to make an accurate play. So then you have to figure when enuf is enuf when your up. I like to use half and whole numbers as either hesitation points or turning points, as i trade for halves and points...scalping 1/8's is not the game for me-too much work ;-) WSTL was up 2.13 points Friday on earnings on a little over 3X normal volume (stock sentiment); opened up an eighth today @ 14.63 in a neg/neutral market, quickly dropped a point to what i thought was a bottom; i went long at 13.63 looking for either a point, or a whole number (15)..i got both. If my plan was really together, i woulda reversed my position and ridden it back down to 14 ;-) But if you're having trouble creating a target price to sell at, you might use a trailing stop similar to your stop-loss: 1-2% of your account equity. Just keep moving it up. Another strategy i've been working with recently is using MACD and MACD histogram/oscillator to time my entries and exits; they can give you an amazingly accurate short <and long> term picture of current sentiment. Hope this helps ;-) -Coyoti