Ken Wilsdon Member Posts: 6 Joined: 4/12/2006 Location: Calgary, Alberta, Canada  User Profile | First, thank you for quoting me in your first post above. It is nice to know that I have said something that is memorable to others. I am more convinced than ever that what I said then is still true today. I agree with you that MOC orders are better than MOO. Professional money (ETFs and some mutual funds that need to adjust their portfolios daily make up the bulk of this - I have heard figures over 40% of the total market value of the stock market is made up of these pros) normally trade in the last hour or so of trading. The closing is often volatile because lots of money is changing hands to determine fair market value. At the open, to the contrary, market makers are trying to balance the overnight buy and sell orders, and secure a small profit for themselves by scalping. Professionals do not tend to enter at the open, but amateurs tend to make decisions overnight to buy or sell, and those orders are on the books. As Mark has put it so well in the Improving RTM Results With Limit Entries thread, most people who use MOO are basically saying "I trust you’ll give me whatever price you think is appropriate". Let's see if I can move the discussion along with a suggestion. There is a way to get the MOC price at the next open, at least some of the time. That is through limit orders. Place a limit order after the close at the closing price of the day. That way, you have no problem with running the ToDo list before the close; you have all night. And you have a fixed price to buy at, or perhaps even a better price if the market gives you a firesale price. Mark, I noted with interest your table from the Improving RTM Results With Limit Entries thread in Post #36860. While in that post you were interpreting the values of the 1% and 2% below previous close, it also provides indirect statistical data showing the value of using a limit order instead of a MOO order. I have highlighted in blue the section with 0% below prior close. As you mention there, this includes IB commissions.  For FTM, there were 4091 trades that opened less than 0% below the previous close vs 9364 using MOO. That is about 43.7% below, and 56.3% at or above the previous close. From that stat alone, it should be obvious that you will get more bad fills than good ones in your favor using MOO. No wonder so many people lose money in the markets. Let's buy high and sell low. The ARM4 is about 45.6% below and 54.4% above, respectively. PPT and HR are higher. Note that if the price at the open is not below the previous close, but then goes below the previous close, the PPT and HR is lower, but still above the MOO values. Overall, it seems worthwhile to ONLY buy if the price is below the prior close. This makes sense, as if the open is higher than the previous close, then it must go through the previous close (which is breaking a support level, indicating weakness), and then must travel above the previous close to make a profit (this time breaking a resistance level, indicating strength). Having day traded a bit, I know the previous close is a support/resistance level. Doing this round trip down and up uses up some of the "potential energy" for future profits. But sometimes the market makers want to "jump" a support/resistance level so it will trigger the resting stops and clear the books, and they do not have to deal with those levels during the market hours. That's one reason why the PPT and HR are so good when the market gaps down the 1-3% at the open and reverses. While I have dabbled in day trading, I prefer swing trading, and like that over RTM methods. If I were to use RTM a lot, I think Mark's method in ATM M&M and FTM makes a lot of sense, as you are using the best RTMs for the market state where they work the best, and ignoring the rest. I personally feel many RTM systems are like catching a falling knife. They are going down when they buy, rather than even one day of going up to confirm the direction, like you can do in swing trading. There is no doubt you can make money with RTM methods, but they must be really accurate and don't allow much leeway for error. Mark, what would be interesting to see would be the first chart in Post #45704, but using below prior close day after buy signal instead of MOC day of signal for entries. I would expect an increase in HR and PPT, and would be interested in the last columns to see if there is an improvement there. If there is, then perhaps a suggestion would be to replace a straight MOO entry with a limit at the previous close. Then, if you bought additional shares at 1% or 2% below the previous close, it should improve the entire system significantly. Many of these major drops, especially at the open, turn out to be reversal candles, or if not at the open, an exhaustion signal on the downside, indicating the bears are finished and the bulls will take over shortly. Ken Wilsdon  Attached file : BelowPreviousClose.png (69KB - 379 downloads) |
