Placing spreadbet stops

[laytonm]

I have a question that I wonder if anyone can help me with. I've been trading now for about 6 months. Having been an investor for some years I read Marc Rivallands book on swing trading - it makes good sense to me and I have been using his method with some success.

My problem is that on several occasions (including yesterday) I set a stop order for a spread bet and it is triggered before it should have done - eg yesterday I wanted to short the Dow at 10305, yesterdays low was about 10316 but my stop sell activated and I will now likely take a loss. This spread seems a bit excessive. Are there ways around this eg with other instruments - I have only tried spreadbets thus far, with City Index.

Any advice would be welcome, remember I'm very much a beginner.

Thanks

Mark

 

[chump]

Good morning,
Just a point, if you wanted to short at 10305 and a SB spike from an underlying market low of 10316 took you into that trade what difference do you think this makes to your trade apart from the spread?

I suppose I am asking you this. If you thought the market was worth shorting at 10305 was it still worth shorting at 10316 ?

This is an 11 point difference. How does this relate to where you would be looking to take profits?

By the way I am no expert I am just asking you the questions that I would be asking myself if it were my trade. I might also be asking myself why do I want to take an entry just above a big round number 10300?

Hope the questions rather than answers help you to resolve the questions you have.
This type of question keeps coming up because of the way SB's work and more and more the only answer seems to be you can only cope with it by accepting it into your trading style. The other alternative being to look for a different access to the market.

Cheers

 

[laytonm]

Thanks, it's just that the method I am using enters a trade when the low of a previous day has been breached, suggesting a continuation of a downtrend in this case. This hasn't happened although the spike (as I now gather this is called) opened the short.

 

[iainpw]

From my experience with D4F it isn't usually a price spike but the widening of the spread first thing in the morning. This widening of the spread can overlap the stop but in my experience doesn't fill it.

Iain

 

[awoodj]

Agree with the last post

I agree and find the same with deal4free although when you are sitting watching it does not make you feel very comfortable as often the spread is so wide you would take a large loss if it did get filled and you have no way of knowing if it will or not for sure.

 

[seguna]

Chump

What's the typical range for this stock in that timeframe?

I've heard many traders, usually experienced ones, mention this sort of variable. Can you please explain exactly how one would go about determining this value for any stock, index or market in a way that is accurate and tradeable?

rgds
S
:|

 

[chump]

Didn't spot this question till now...first I'm not experienced in trading so anything I say should be taken in that context.

Well, I wasn't referring to the ATR..average true range

What I was saying would take a book to explain (plug now in for some future time)

Look when you look at a chart what do you usually see ? Alternation..price not going in straight lines..often over quite fixed time periods price just bounces around between between an upper and lower range (oscillation)...each oscillation is a trend of a sub time period
I think the time periods might even be related in some manner to the Future/Options calendar.


Whenever price gets to an extreme only one of two things can happen
a) it attracts attention that pushes it back into its range,
or
b)it starts to trend to establish a new price range.

Now given stocks oscillate 70% of the time and only trend (establish new price ranges ) 30% . For the sake of argument lets assume we don't know which of these events will happen. Well on a probability basis I want to trade it as though it will oscillate. That means when it trends I will get blown out of the water.

However, think about it 2/3rd of the time if I match width of stop to price range I succeed and just 1/3 rd of the time I will take a hit. However when I take an hit that should be a clear signal to reverse and catch the start of a new price range.

Thats it conceptually. The hard part is is believing in the conceptual numbers and taking the hits. By the way I'm pretty sure this is exactly what 'envelope' trading is based on.

Trying to trade this way however on an intraday basis with SB's will actually be more problematic than doing so position trading, because of spread ,price range and the nature of how sb's make their price. Now relate this to the original comments that started this thread.


Cheers

 

[seguna]

Thanks Chump

Helpful, but not quite what was requested. For this type of variable to be truly tradeable , it needs to be objectively measureable.

By the way, what is the basis for your 70-30% assessment on market behaviour?

rgds
S
:|

 

[chump]

Seguna,
The 70/30 split is generally what is quoted for market behavioural activity and indeed this also came from a source which I respect.

As for "For this type of variable to be truly tradeable , it needs to be objectively measureable". It is , you might wish to read Robert Fischer for a taster on swing analysis.

I don't know what you requested other than you asked for something in relation to a former post I made. All I can do is explain that post. If it isn't what you were looking for, no probs. Good luck with your research.

Cheers

 

[chump]

Seg,
In fact don't bother reading Robert Fischer. Do it for free. What I was trying to describe for you was nothing more than supply and demand and I can't think I 've seen it explained better than DBPhoenix does on the elite thread he has posted over on General Chat. Just read it and printed it down myself last night.
To be frank if you can't 'observe' supply and demand without adding in assorted indicators and filters then what I had to say is going to be of little value to you. Have a read its' worth it.

Cheers

 

[LevII]

Chump - As TB says, it doesn't really matter where or why I am placing my stops, if I get stopped out due to artificial price spikes then that can't be fair.

Such behaviour, if it happens, may be not only unfair but also unlawful.

Suggest you contact your SB company with a market chart for the time your stop was taken and ask them (a) to explain and (b) if there is no proper explanation to remedy the position.

If they will not co-operate Try the FSA.

 

[Trader333]

A couple of my colleagues have had the issue of SB companies activate their stops by spikes when the market didnt really trade at the stop price. What they do is call up and object and then explain that they use a RT datafeed that proves the market did not trade at the stopped out price. When the SB company know that they have RT datafeeds, and as long as they are prepared to send a screenshot of the chart, they always get the stop out removed.


Paul

 

[Splitlink]

A couple of my colleagues have had the issue of SB companies activate their stops by spikes when the market didnt really trade at the stop price. What they do is call up and object and then explain that they use a RT datafeed that proves the market did not trade at the stopped out price. When the SB company know that they have RT datafeeds, and as long as they are prepared to send a screenshot of the chart, they always get the stop out removed.


Paul

Useful post. I didn't know that. I thought that SB's were a law unto themselves in respect of
stops, as with a lot of other things. My suspicion of SB's spikes makes me take the risk of not putting stops on share bets. I may test you by putting stops on some of my trades!

Split

 

[Trader333]

Splitlink,

I dont spreadbet but this is what my colleagues do and so far it has worked although they trade futures and not stocks.


Paul