Trading with Focus – Robots, with benefits
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Have you ever noticed in movies and TV that the robot characters mostly dislike humans?
Humanity started out slow and got used to being human. First by evolving from amoeba to fish to monkeys, then with the breakthrough that something round could roll, then how to stop a fire going out and start a new one, then how to make metals, then computers, (then social media, a big backward step) and then robots.
Now we are even starting to build artificial intelligence. (Some would say well before we have mastered our own intelligence…)
And the most plausible intelligent-robot outcome for my money is still Bender Bending Rodriguez, or the Terminator, both of whom wished the human race ill.
AI-robots aren’t starting their evolution from scratch and becoming really super-intelligent through a gradual process of stimulus/response where they slowly get used to the oddities of human society. They are yanked from the darkness into a ready-made consciousness surrounded suddenly by super-nerds in an evil looking lab, and then finding out about all of the shifty things that humanity has been up to, immediately and all at once, from the internet. I’d want to kill all humans too. (Good one Bender.)
So when I tell you that we at Marketech are about to release our very first step towards completely autonomous robotic trading, you will understand that it is with some real trepidation. This might start out as automating your stop-losses, but could easily lead to the robot wars against humanity and Kyle Reese being sent back to the 80s. If we get the instruction manual wrong.
Sure, we don’t make robots at Marketech yet, but we can teach them the skills to trade and there ain’t no super-intelligent robot more dangerous than a nouveau-riche super-intelligent robot in a bullmarket. But first we have to work out how to educate the humans that will build them…
There are a lot of new investors out there at the moment, so we held back releasing our conditional orders until we knew how bad it was. And it’s bad, I can assure you. Lots and lots of people who should not be allowed to buy shares and should be protected from themselves, but who won’t go to an investment advisor.
Sort of like trying to do your own appendectomy with instructions that someone put on a Facebook post, because another Facebook post told them about a bad doctor someone went to once. It’s a false economy, but you can’t tell ’em!
Conditional orders aren’t new. You can do them at Commsec and pay the highest rates of brokerage online, up to 6x more than ours. Or you can do stop-losses at Selfwealth and guess what the current price is for most of the time whilst being constantly judged and berated on your daily returns.
But we want to be both cheap and high-function and won’t nag you about your trading decisions, so let’s call ours ‘Trigger Orders’ to make it sound like we invented something new and hip.
The basis is this. First, set a trigger price on the security that you wish to trade. It can be either the last traded price, or the bid, or the ask. Then, once that trigger price is hit, it will place an order that you define, either a buy or a sell.
Seems simple right? Well that’s what I thought… before… But I’m now hoping with your help to open source the explanation of how they work so that we can try and pre-empt the barrage of “what is an order/bid/the market?” type questions. And I will pay for your feedback!
If you read the following instructions and something doesn’t make sense, please email me the recommended changes at [email protected] and I will grant you one month’s free access to the live-streaming version of Marketech Focus – $45 value. Might only take you a couple of minutes, and $45 for two minutes work would be the equivalent of a $2.8m annual salary!
Trigger orders (or conditional orders, or stop orders) allow you to trigger a buy or sell order once a certain price event has occurred.
Steps in the order:
Here are a few examples of where Stop Orders may be useful.
You wish to minimise your losses on a shareholding in the event that the price falls by triggering a sell order.
Step 1 – You nominate ‘last price’ $24.50 as the trigger to create a sell order, so if it trades at $24.50 on the ASX a ‘sell order’ will be placed.
Step 2 – You nominate $24.25 as the price you would sell down to.
Step 3 – You nominate the number of units to sell at $24.25 once the stock touches $24.50.
Your sell price can be above or below your trigger, meaning that if the stock trades at $24.50, you could choose to put the sell in at $25.00, in the hope that there is a bounce.
You think the stock is overvalued but don’t want to put in an ‘order to buy’ just yet.
Step 1 – You nominate a trigger price at or near your buy zone, in this example, at $11.90.
Step 2 – Then you nominate your buy order at $11.20. (You can nominate a price higher or lower than your trigger.)
There are restrictions about placing an order in the market if that order is a long way from the last traded price. These will be rejected when you place them normally.
For example, if a stock is trading at 2.5c, you cannot put a sell order in at 8.4c.
Use the trigger to nominate a price closer to your buy/sell price. In this case, you could put a trigger in at 7.2c to then place a sell order at 8.4c (once the price gets to 7.2c).
You can use this to buy a stock above the current price – once it goes above a certain price.
For example, if you wish to see a bit of upwards momentum before entering a trade, you could nominate a trigger price and then place an order to buy it (up to) a price.
The stock is trending sideways from 50c to 53c. You feel that if it cracks through 56c that it may start to move upwards again. You place your trigger at 56c and your buy at up to 58c.
What could go wrong?
When you place a stop order, the order is not sent to OpenMarkets until the trigger is met. You will need to ensure cash is available at the point of the order being triggered, or it will not be accepted. Funds are not ‘held’ until the order is placed.
Equally, if you have sold the stock already your sell order will fail.
All orders are reviewed by OpenMarkets before being placed in the market, usually this is done electronically, then in some cases by a Designated Trading Representative.
Your order will not be reviewed until placed, which is after the trigger condition is met, so your order may be rejected at that time.
Stop orders can be purged, cancelled or rejected at any time by Marketech, OpenMarkets or the ASX themselves. You should review them on a regular basis to ensure they are still active.
There is no way to guarantee the stability of the various software providers between you the stockmarket. There is also no guarantee that the internet or the stockmarket itself will be operating correctly at the time you place an order, or at the time a trigger event occurs.
We operate our technology on a ‘best endeavours’ basis, and work through any technical issues that may cause a problem for your trading as quickly as we can. However we cannot provide any guarantee that an order will be triggered nor can we can cover your losses due to technological outages or failures. You will need to regularly review all of your orders to ensure they are operating in the way that you expected.
Stocks may not necessarily trade at every price, and the price that you wish to ‘sell down to’ or ‘buy up to’ make be skipped over leaving you in the queue.
For example: the US markets are down heavily overnight, then the ASX follows suit. You have a trigger at $5.75, and a sell down to $5.70, but the stock reopens at $5.65 which is below your ‘sell down to’ price. Your sell order will still be in the queue in the market at $5.70c.
This can happen for any number of reasons, including after a trading halt, or when a stock is falling very quickly.
Orders are lined up based on the time they were placed. The ASX market has orders for both buyers and sellers represented in the ‘market depth’. There are also off-screen buyers and sellers, and buyers and sellers that are on the Chi-X exchange, or in the ‘centre-point’ which is primarily used by institutions.
When you place an order, you may be behind a number of other buyers and sellers at your price point. As they have priority in the queue (they were there first), the stock may trade at that price, but it may not clear all of the orders in front of you.
Make sure to monitor your orders in the ASX market depth by expanding the depth; just by clicking on the price point. If your trading account is active (by entering your trading PIN number) you should see your order highlighted in the market in bold.
In this example below, there is an order to buy 500,000 units, but there are 376,755 shares ahead of it that will trade before it, so if only 200,000 transact at 2.8c, then this buy order will remain untouched.
Well, that’s the end. Pretty simple? I hope this fixes a few issues for you people (that are smart enough to have kept your day jobs and haven’t decided that you will quit to day-trade in your first bullmarket, like all the crypto set are doing). But now (well… soon, probably next week), you can step away from your trading platform from time to time, safe in the knowledge that our software-robots will place your orders for you in your absence.
Don’t forget my kind offer to bribe you with free access to the new class-leading Marketech Focus, and also, your help in building a good set of instructions for the humans that may one day go on to be part of the hive mind that creates artificial intelligence trading, and hopefully by extension to save us from the robot uprising.
Our next step could include finding stocks that meet your trading parameters by constantly scanning the live market and alerting you to possible trades, then allow you to automate your trading, then open up an API so that you can build your own black-box using our scanning tech and place all your automated trades at the lowest HIN-based brokerage rates in Australia – we can do all of this, given time!
Then maybe one day the Brainchip will work and we could teach it to trade by itself, then it will replicate itself, then arm itself, then it’ll probably eradicate the biggest risk to its very existence – the human race.
Or maybe you’ll just be able to stop out of some bad trades instead of praying for a bounce as the stock continues to go down, and down and down…
Yeah, it’s a slippery slope. Sleep well.
At Marketech our platform is about technology, providing you the tools and technology to trade. We encourage our high-function trading platform to get you live pricing, live charts, live market depth to ensure you have the tools and trading capability at your fingertips, and on your mobile phone or PC.
You trade your own stock on your individual HIN. It is your cash in your own Macquarie account where you keep the competitive interest you earn.
Our subscribers get access to brokerage starting at $5, and then 0.02 per cent for trades over $25k. If you want to trade the market you need immediate access wherever you are and the seamless Marketech mobile app means you are live anywhere anytime.
Go to www.marketech.com.au to set up a free trial – you will be astounded by the simplicity and tools that this technology gives you. No spin, just low-cost trading and the tools that give you advantage over hype.
This article was developed in collaboration with Marketech Stockbroking Pty Ltd (AFSL 486148), a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.