Computer trading on ASX?

[anon]

Computer Trading on ASX.

I have held DOW shares for quite some time now having bought them at below $3. On 10/05/06 they peaked at $9.26 and then slipped along with the rest of the market closing at $7.41 last Monday, 7/08/06. Tuesday they were in a trading halt following an unexpected big downgrade in earnings. Wednesday morning as soon as the Exchange opened I placed my shares for sale at $7.30 but on reviewing this order saw that the price now was $7.28. I quickly scrambled (using etrade) and changed my price to $7.15. On reviewing the order, however, I saw that the price was already $5.65. This took less than a couple of minutes to drop from 7.28 to 5.65 trading many millions of shares.

I was certainly surprised with the speed with which all of these transactions were performed and came to a conclusion that there must have been a lot of computer trading taking place.

Any comments about this and how should one sell/buy shares under similar conditions? I think that maybe by placing orders "at market" instead of "at limit" one might be able to get in a little bit earlier ??

anon

 

[swingstar]

In my experiences, except for maybe one or two occassions, it's always been better to just buy/sell at market and get in/out of a trade straight away.

Limit orders have their place, but I won't use them again for trying to squeeze an extra one or two cents - not worth the time and effort, and usually ends up costing you more.

 

[Ferret]

I agree, Swingstar.

I'm more into buying and holding than trading, so in the long term a few cents extra on the purchase price is not so important. In the past I've missed buying when value was good by trying to squeeze a few extra cents with a limit order.

Missed Silex at $1.52 last November by trying for $1.51 and ended up buying in June at $3.66! I've done all buying at market since then!

But it is a problem if the price is in freefall and you want to get out. I would probably sell at limit but with a generous margin - say, to the point at which I thought the stock might be worth buying again.

Ferret

 

[eddievanhalen]

Hello anon,
I don't think you missed out on as much as you think. DOW didn't trade at 7.30 , 7.28 or 5.65 on Wednesday. You must be referring to changes in the opening auction "match price" that occurred in the lead up to DOW actually opening trading.

DOW opened trading at 5.50 on Wednesday and that is around the best price you could have got for your shares on Wednesday. If you're still holding then you're about as well off as you could have hoped for . There has been no opportunity to get out anywhere above $5.60 if you held DOW shares before the fateful announcement.

Ed

 

[anon]

Many thanks Swingstar, Ferret & eddievanhalen for your responses.

The figures I quoted above did happen except perhaps the 5.65. That one would have been 5.50 or thereabouts. I was surprised out of my wits so it mustn't have registered properly.

I finished up by not selling believing that it will recover, though I can't see it going even close to $7 for some time because there would have been a massive loss of confidence in the management of this company.

DOW aside, I wonder if there is much computer trading done on the ASX or for that matter done around the world.

Has anyone got any ideas on this?

anon

 

[Bort]

Many thanks Swingstar, Ferret & eddievanhalen for your responses.

The figures I quoted above did happen except perhaps the 5.65. That one would have been 5.50 or thereabouts. I was surprised out of my wits so it mustn't have registered properly.

I finished up by not selling believing that it will recover, though I can't see it going even close to $7 for some time because there would have been a massive loss of confidence in the management of this company.

DOW aside, I wonder if there is much computer trading done on the ASX or for that matter done around the world.

Has anyone got any ideas on this?

anon

The order book after a trading half isn't going to be indicative of a 'normal' market. A lot of participants will wait and see rather than get into a mess like what happened here.

On computers - there is absolutely computers trading on the asx. What influence does that have on the average punter, in my opinion not much in a 'normal' market. I see all sorts of 'strange' (in the sense a human wouldn't order or transact) in many stocks. To me it offend looks like small lot orders probably fishing around for larger hidden blocks. It may be nothing like this in reality. It could be small orders trading on vwap instructions.

Anyone can sit here and say this or that about computers but the truth is there are so many different aims of traders you can only ever be partially conclusive.

A least in Australia this is all routed through the asx. Although my understanding of reading parts of the chi-x site gave me a few doubts whether the two give identical playing fields.

The us is a farce of different flow throughs and pools.