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Thursday, January 12, 2012

BURNED OUT

I am taking a day off from trading, so no real post today. For my views on the various markets just review the recent posts, nothing has really changed. I know my limitations, and when we get these one way trains in the indexes like this with small ranges that just creep up or down every day, I just don't find many trades to take. There seem to be a lot of cross currents. I am short in the grains, but those trades appear to be messed up now with the big reversal off the report lows that has taken place. I knew I was dead when one of my friends who is notoriously wrong, shorted the bounce. I was tempted to go to the market and exit right when he did that and I should have. I don't know if my stops will survive the bounce or not. I doubt they will.

I do still have that CTAS stock trade on which is out of the money by a little bit. If it closes <= 37.33 I will exit. In as much as I am looking for a short term top in the indexes, it is impossible to pick the day when the markets are trading like this and I am not going to try to. Been there done that in my younger days. I am continuing to monitor several stock trades with the new rules and a few of them are underwater now but not closed out yet. It appears my winning streak is about to come to an end here. I am amazed they have done as well as they have with the market just going straight up like it is. Since the market is extremely overbought, I am not getting any buy signals which require oversold levels to be hit. A work in progress.

I learned something today that I did not know that I feel compelled to relay to everyone. When you have stops in electronic markets the market has to actually trade at the price for the fills to take place. If it gaps past it on a big opening like what happened in the grains today on the report, the orders remain there and will fill only if the market trades back to them. This is particularly dangerous in that if you have a protective stop in on something you better make sure to be there watching the opening. I was trying to short Wheat today and had alarms set for the price level. When they went off on the opening I knew something was up. I then noticed after the huge gap, I was not filled in any of my accounts because the open was 20 cents past where my orders were. Some of you may know this, but I did not know this was how electronic markets handled gaps.

Have a great weekend and I will be back next week.

4 comments:

Steve said...

I think how stops are handled with opening gaps depends on your broker. With stocks, I've had gap openings beyond my stops, and my stops did trigger right away.

John M said...

Thanks, I never encountered that gap problem but will keep it in mind. There are some little quirks in the electronic markets, but this one is kind of serious.

Anonymous said...

Chris I found that out recently with PFG Best ( they are a good brokerage as they are really trying to be a broker unlike MFGlobal )Upon reflection MFGlobal had none of the bells and whistles that PFG has so it was not their intention to act as a true Brokerage...All is new to me at PFG best so I put it down to their way of trading the electronic markets...As I remember MFGlobal i would always get a fill even if it gapped dow ( at least I think so )

BQ

Chris Johnston said...

Steve stocks are completely different, what I stated applies to futures not stocks, they are completely different systems. It is possible within futures that PFG who is my main broker does them differently but I doubt that. They would then be using discretion in handling customer orders which would be illegal. I think they would be way to open to lawsuits if they were doing it differently than everyone else.

This really only applies to a few markets. The grains have two openings, so I think for the most part the grains are where you need to be careful. The softs could also have a problem, but at least they just open once.