Danger - trading when the market re-opens

[SP Trader]

> This posting by Joe DiNapoli is being sent free to our entire
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> http://www.fibtrader.com/proprietary.html
>
> Events of Sept 11
>
> Contributors to these pages may have died yesterday. My Family
> lives in Boston and my niece was scheduled to board the flight
> that struck the south tower. She didn't make the flight but her
> coworker did. As a frequent world traveler on an American
> passport I'm keenly aware of the risks. I was under death threats
> when I spoke on financial matters in a predominately Muslim
> country several years ago to a studious, attentive, and friendly
> group who were also predominately Muslim. Since the weapon of
> choice is typically knives in that country, I lined my chest and
> stomach area with the morning paper, bunching it securely under
> my belt. It was a uncomfortable presentation.
>
> Our hearts go out to all those directly or indirectly effected. I
> guess that's all of us. My hope is that we learn more from this
> horrific event than the knee jerk reaction of retribution. In my
> view, it's a bit more complicated than a group of fanatics
> attacking freedom.
>
> Trading after a disaster
> How can we handle extreme emotion in financial markets? Please
> re-read the disclaimer liberally pasted throughout our web-site
> and literature. I'll give you my best shot at this but there are
> no guarantees in situations like these.
>
> I was around in the days of $50 silver, 60 in the Bonds, and some
> of you know I predicted the 500 point down day in the DOW in 87.
> While this brings experience to the table it does not mean what I
> will say below is going to be right. It's just my best shot.
>
> The fact that the markets are closed for a few days is a very
> good thing. It allows the planners (Fed, market makers,
> specialists, and exchange officials) to plan and emotions to cool.
>
> Firstly, If you don't have to trade, or you have insufficient
> experience, don't trade.
>
> Your biggest problem in situations like these is the getting the
> fill. Regardless of the accuracy of our approach, in times like
> these, you have to get the fill to make or preserve capital.
>
> You'll likely be ruled to death by the exchanges on any of these
> markets. If you don't know what I'm talking about see one
> example of this in an article I wrote entitled: Where is my fill
> !!(X'd trades) (originally published in Stocks and Commodities
> Magazine) which is available free on the website.
> Usually it's in our Proprietary client area but we've temporarily
> made it available free on the following link.
> http://www.fibnodes.com/xd_trade.html
>
> Difficulty in getting your fill will be proportional with the
> panic in the market or lack thereof.
>
> Futures pit issues:
> Along with X'd or canceled trades mentioned above there's the
> "up-tic rule". Now I'm simplifying this for brevity but the
> bottom line is that if prices keep falling without an up-tic
> you're not "due a fill" as a seller…
> Even with a market order. Those standing in the pit will be the
> ones that are able to sell when bids come in. They will be sure
> there won't be an up tic until sufficient support is apparent,
> usually at a very major fib number like the ones we've been
> talking about for the past year and a half!
> Your sell orders will then be filled at the bottom when they want
> to buy (from you).
>
> Then there's fast market rules which basically say they can do
> about anything they want down there with your order. You can make
> money one way for sure, bet with someone crazy enough to take the
> bet that whatever the specialist, floor trader, etc. do with
> your order, it will not be in your financial best interest.
> You'll win the bet but you'll lose on the fill.
>
> Electronic trading:
> Depending on the panic or lack thereof, this is a big test for
> the electronic trading computers and I don't know how it will
> come out. I do know that those Electronic trading agreements
> we've all signed are not designed to protect us. Re-read them. I
> would not count on being treated much better in that medium than
> any other.
>
> NYSE:
> Anyone selling on the 500point down day in 87 was filled at
> 500points down even if they sold when the market was only 100 points down.
> "Orderly market" mandates do not mandate specialists to loose
> billions in a day getting you your fill-- If you sell in a vacuum
> you are at their mercy.
> Most of you are aware of the up-tic rules when going net short on stocks.
>
>
> NASDAQ:
> Again, those trading in 87 know how market makers treated the
> public. Yes there have been rule changes but if it comes to Major
> market makers loosing billions or you getting your fill, guess
> who'll be the looser.
>
> ECNs will be available to NASDAQ market makers to lay off orders,
> so the ECNs may not be a haven either. You need a bid to get a fill!
>
> Perhaps the Fed or something else has given guarantees or some
> such thing to large entities or institutions to keep things
> orderly. I don't know but I would guess they have.
>
> Lets take 3 orders-- in a market we'll call "WAFTT index" (Where
> Angels Fear To Tread). The situation may vary depending on the
> market you trade but the outcome will likely be the same.
>
> 1)You're a short seller initiating a position at market. The
> market last is 20,000. Your filled 10000 lower, at the low, since
> there's no up-tic.
> The market closes 5000 up from the low. You were right, the
> market is off 5000, but… you Lose!
>
> 2)You're a buyer initiating a position in WAFTT, at the market
> you're immediately filled at 19999. The market trades 9999
> lower --you're sold out of your position by your broker for
> insufficient margin, at the low, a market maker, or local, or
> specialist takes your sell, he's up 5000 and you're in deficit.
>
>
> 3) You're closing an existing short position at a pre determined
> DiNapoli profit Objective-- It's a perfect play, WAFTT cover the
> short at 10,003. The market goes through your buy point by a few
> points. But you didn't get the fill --fast market, X'd trade, or
> the order matching computer broke or was overloaded. You can't
> get reporting on your trade as the exchange is too busy and you
> don't know until that evening when the market closed that you
> did not get filled. Or perhaps you've
> re-sold, Thinking you were flat, on a bounce and now you're
> short 2 times the position and the market is 5000 off the lows.
> Called higher tomorrow. There are many miserable scenarios and
> yes I'm simplifying possible events but these are real possibilities.
>
> So what do you do?…
> If you don't have to trade, or you have insufficient experience,
> don't trade.
> Don't sell or buy into a vacuum. Wait for retracements and place
> your orders so price action is apt to move significantly through
> your pre-calculated price points to better ensure your chance of
> getting that fill.
> Record any conversations with brokers. Time stamp all orders!
> If you trade electronically have back up phone numbers. Have back
> up local numbers as well as 800 numbers. Have an automatic dialer!!
>
> Major fib levels should hold--Look for Confluence and Agreement
> to trade against and trade small in case a position goes against
> you, so you can hold on to it until you get a retracement back in
> your direction.
>
> If your retirement accounts are low on equities as we have
> repeatedly advised since November of 99, now may be the time to
> get some great stocks, but only at major fib numbers- In the past
> weeks I have posted some of those key numbers on our proprietary
> client web pages for the indexes. It's easy for you to calculate
> them on your favorite stocks. Forget value investing-- P/E
> ratios and such. Put your orders in ahead of time-- Bonsai in as
> described in the book Trading With DiNapoli Levels" and hold on
> to your lunch. It could be wild ride!!
>
> If you feel this would be of value to anyone feel free to pass it along.
>
> -Joe DiNapoli.
> http://www.fibtrader.com
>
>
> PS. This message is ONLY being sent to traders who have
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> available to anyone.
>

[Ron]

sptra...@msnbc.com (SP Trader) wrote in message news:<Ro0o7.23$l76....@dfiatx1-snr1.gtei.net>...

> > you're not "due a fill" as a seller&#8230;

> > market is off 5000, but&#8230; you Lose!

> >
> > 2)You're a buyer initiating a position in WAFTT, at the market
> > you're immediately filled at 19999. The market trades 9999
> > lower --you're sold out of your position by your broker for
> > insufficient margin, at the low, a market maker, or local, or
> > specialist takes your sell, he's up 5000 and you're in deficit.
> >
> >
> > 3) You're closing an existing short position at a pre determined
> > DiNapoli profit Objective-- It's a perfect play, WAFTT cover the
> > short at 10,003. The market goes through your buy point by a few
> > points. But you didn't get the fill --fast market, X'd trade, or
> > the order matching computer broke or was overloaded. You can't
> > get reporting on your trade as the exchange is too busy and you
> > don't know until that evening when the market closed that you
> > did not get filled. Or perhaps you've
> > re-sold, Thinking you were flat, on a bounce and now you're
> > short 2 times the position and the market is 5000 off the lows.
> > Called higher tomorrow. There are many miserable scenarios and
> > yes I'm simplifying possible events but these are real possibilities.
> >

> > So what do you do?&#8230;

Joe,

You wrote....

"Futures pit issues:
Along with X'd or canceled trades mentioned above there's the
"up-tic rule". Now I'm simplifying this for brevity but the
bottom line is that if prices keep falling without an up-tic

you're not "due a fill" as a seller&#8230;

Even with a market order. Those standing in the pit will be the
ones that are able to sell when bids come in. They will be sure
there won't be an up tic until sufficient support is apparent,
usually at a very major fib number like the ones we've been
talking about for the past year and a half!
Your sell orders will then be filled at the bottom when they want
to buy (from you)."

I'd like to say that trades commonly get X'd out and in many cases,
the cause is an error in reporting by the pit reporter.

The idea that outsiders (paper) will sell the lows is a very broad
statement. The floor cannot keep the market from an uptick here and
there. If we're in a free fall, it's usually the floor that is buying
the market to cover their shorts. As a former floor trader and
broker, I can tell you that I've bought the low and sold the high many
times. That doesn't mean that I ever made a huge profit from it.
Floor traders generally are in and out of the market. Scalping for a
few fast points when they can get them.

Your statement is more myth than fact. Today's market place is vastly
different than what it used to be. We now have huge funds trading and
many large locals that can move the market from time to time, but none
of them can sustain these moves for any real length of time. In other
words, there are too many heavy hitters in the game these days and
only a fool of a floor trader would dare stick his neck out too far.

The bottom line is that the market is going to go where it wants and
no one person or entity is bigger than the market. If the waters get
too rough, then traders need to be smart enough to get out of the
water and wait for more favorable conditions. This actually reminds
me of a relative/customer who used to trade T-Bonds and place tight
stops and market orders when reports came out. He always thought that
the floor was screwing him. They weren't. He was just trading in
conditions that didn't favor him and was looking to blame someone.