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Average Trading Range - Volatility

Chart Forum » Trading - Systems » Archive through March 24, 2005 » Average Trading Range - Volatility

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ingot54
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Thursday, January 20, 2005 - 03:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



After a search, I have been able to discover that Average Trading Range fairly well matches Average True Range, found on the "Indicators" of IC charting software. Also, it is appropriate that, as a background to this thread, the reader be familiar with some good info on another thread :

https://forum.incrediblecharts.com/messages/12/338858.html

There are two reasons for this thread.

FIRSTLY: To find out the most applicable time period setting for this indicator, as found by its users on the forum.

For example, a 200 period Average Trading Range (ATR) would give a smoother indicator line, but would not reflect recent increase/decrease in volatility of the underlying price.

Whereas, a 10 period setting, might give a true reflection of volatility, but prove inadequate for purposes of calculating appropriate position for stop loss.

Colin discusses ATR here :

http://www.incrediblecharts.com/technical/average_true_range.htm

But little info is given regarding the effects of changing the periods scale.

I feel this is important to know, particularly when market conditions are unstable (probably "all the time" would cover that one), and when deciding the volatility for a particular equity when setting stops.

From my reading about ATR on other threads, consensus would place stops at 2 times, to 2.5 times the average daily volatility in price, or Average Trading (True) Range.

Before continuing, I ask, would it be better to use a more volatile ATR (shorter period, such as 10) with a 2 times factor _

ATR_10

or a smoother ATR, (longer, such as 50), and use the highest recent peak?

ATR_50

I realise this is conjecture, but am seeking the experiences of those who have used ATR.

In my next post ... my second reason for this thread.


It's much easier to ride a horse in the direction it's going - Abe Lincoln.

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ingot54
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Thursday, January 20, 2005 - 03:44 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



SECONDLY : To demonstrate that ATR can have other uses, specifically in choosing the equity most likely to deliver the best daily profit on investment.

How?

Consider TLS above. The 10 period ATR can be shown currently to be approximately $0.044. A $5,000 investment in TLS will deliver us 1035 shares @ $4.83. The profit possible from fortuitous entry/exit on any "average" day, is $45.50 (1035 X $0.044).

Consider also MBL (Macquarie Bank Limited) : The 10 period ATR is approximately $0.62. A $5,000 investment will buy 103 shares @ $48.27. The profit possible from similar conditions to above trading, would be $63.86 (103 X $0.62).

This simple calculation/test can be applied to any stock thrown up by your screening software, when trying to decide which has the potential for the most short-term profit.

Unfortunately, this is fine for day-traders, under optimum conditions, but because of the myriad variables traders deal with, probably would not be as beneficial as the maths indicate.

Comments?







It's much easier to ride a horse in the direction it's going - Abe Lincoln.

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gohard
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Friday, January 21, 2005 - 10:05 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Forum,
I would like to add to the thread with the following scenario.
A further point in my test for the answer is which value of the ATR do you continue to use. For example on the following chart say I bought at $31.96 ATR is .48 as you will see the ATR continued to increase with the trend of the share reaching a peak of.87.
Using my formula, 2.5*.48 = 1.20 subtracted from top 38.48 = 37.20 our trend retraced for a couple of days,took me out, then took off again, if I had followed the rise in the ATR to suit the trend I would still be in the trade but stopped out at 36.83.
Because the ATR climbed so quickly was the 2.5*ATR the correct formula ? or should I be using the 21 {D}SMA.Red line
If I followed the rise all the way up with the ATR till it topped, ATR made.77, with the price at 40.15 -1.92[2.5*.77] = 38.23 a difference of 1.03 would have been made.
I am still in the trade at this time with my finger on the 38.23 exit.
Would mean a lot more work on a daily basis particularly if one has a holding of shares that are in a rising trend, but it could well put your profits in better shape, a lot of the shares don't show this much rise so it would make the difference work wise.
Hope this all reads and makes sense, I have difficulty expressing myself with writing information.
My thoughts only,
Cheers G
WES


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ingot54
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Friday, January 21, 2005 - 02:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Gohard

That's one of the problems with Volatility - it is unpredictable! - I think you are right to question which ATR to use.

Personally I would change my stops to reflect the current ATR value. Why? Because it is exactly the increasing volatility which could prematurely take you out of the trade.

I think one should always try to operate on the tightest stops that will keep you in the trade, whilst dealing safely with "noise".

Looking at your figures, I calculate that your Stop Loss, based on 2.5 times ATR, would range from 3.75% to 4.29%. For me, that is a bit tight, because I have this paranoia about artificial spike lows to eject me from the trade.

As for using the 21 day SMA Red line, providing it has a healthy gap initially, to get you into profit, I see no reason not to allow it to take you out of a trade. Again, if the share is so unstable that it keeps "visiting" the EMA, it might be more trouble than it is worth. But if the ATR is rising/falling, it should just be a matter of daily "maintenance" to reset SL.

I personally would be using 5% to 6.6% SL's (comfort zone for me) for my trades, but because this is subjective - the "art" of trading - I can move it about a bit according to ATR, or volatility aberrations.

Thanks for your response.


It's much easier to ride a horse in the direction it's going - Abe Lincoln.

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stevo
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Friday, January 21, 2005 - 03:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I use around 2 times ATR on weekly charts. I would find 2.5 times ATR on daily charts far too tight a stop, but that is because I am after longer term trades. I am sure that there are shorter term traders that use less than 2 as the multiplier.

Assuming that I have my position sizing correct then I don't consider that any sort of fixed % stop ignoring the stock's volatility to be appropriate. ATR is the basis for a very robust stop based on the stocks volatility.

Any portfolio testing I have done on stops suggests that, for longer term traders, number well in excess of 2.5 times ATR are more appropriate on daily charts. I am assuming that this is a ratcheted stop - it only moves up or stays the same, it doesn't drop.

I don't trade off daily charts. There is too much random noise for me to come up with a daily chart trading system that beats weekly chart systems. Obviously I am in the minority. Many would struggle with ATR trailing stops on weekly charts as a stop, especially since I only act on the close.

stevo


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gohard
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Friday, January 21, 2005 - 04:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Stevo,
Thanks for your information,just ran a guick chart using the weekly profile, with the result it certainly proves that I would be still in the trade my question is are we possibly now giving back to much profit with your factor of ATR*2.In hindsight one can make that observation, but given the price entered it would be nice to take the most profit if possible.
Chart following
Cheers G
WES Weekly


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smallworld
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Friday, January 21, 2005 - 09:59 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



ingot,
After reading your post, in particular "
That's one of the problems with Volatility - it is unpredictable! - I think you are right to question which ATR to use.

Personally I would change my stops to reflect the current ATR value. Why? Because it is exactly the increasing volatility which could prematurely take you out of the trade.


I thought to myself, if we modified the atr stop with another measure of volatility, we might be able to see what that might look like. I chose to use bollinger band width as a measurement of volatility. One of course could also use historical volatility:

---------------------------------------

Selloffset = Param("offset using chandelier", 18, 10, 20, 2.5);
Multiplier = Param("ATR Multiplier", 2, 1, 5, 0.5);
ATRdays = Param("ATR period", 20, 5, 50, 5);
BBmod = Param("using BB", 0, 0, 1, 1);
Y=Param("BB Length",20,10,50,1);
Z=Param("BB Width",2,1,3,0.5);
BT=BBandTop(C,Y,Z);
BB=BBandBot(C,Y,Z);
BW=(BT-BB)/(MA(C,Y)+0.0000000001);
SQ = LLV(BW, 90);
Chandelier = HHV(H - Multiplier * ATR(ATRdays)*IIf(BBmod, BW/SQ, 1), Selloffset);
Plot(Chandelier, "Chandelier", colorOrange, styleDots);
----------------------------------------------
The result are interesting. it certainly kept the WES trade in place Aug last year.
But as a short term swing trader, an alternative for me is to have a tight stop and a re-entry rule in place
One with modified ATR using 2xATR(20 and an non-modified using 2.5 ATR
modified 2xATR(20) with BB
ATR


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tony_m
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Saturday, January 22, 2005 - 06:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



A couple of years back I did some testing using ATR variations of a 26 period linear regression based ratcheted ATR stop on weekly charts to try and understand where the the optimum might be. Surprisingly it was around 3.25 times ATR that produced the best results.

It was a bell curve which peaked around 3.25 and dropped off either side with values toward 2.5 X ATR causing too many early exits and values above giving back too much profit.

This whole stoploss/profit protection thing is one of the reasons why I follow the Alan Hull concept using a combination of ATR stoploss and momentum based exits, in this case ROAR. In most cases it is the momentum based exits that take me out of the stock, not the stoploss.

Tony_M


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ingot54
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Saturday, January 22, 2005 - 08:55 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Stevo and Tony_m -

This is good thinking.

Usually the profits are in the long trades, (with few exceptions). I think the weekly view is what I overlooked when searching for a figure.

You both seem to arrive at a figure around 2 to 3 times weekly ATR. However, as Stevo stated, this requires good nerves - gutsy trading to hold a weekly view when a weekly low is approaching.

In order to avoid the spike lows that prematurely eject one from a position, I think now the weekly ATR would be the answer.

Gohard - would you agree this answers the question? Weekly trading stops will keep you in a trade for the longest run up of profits, AND protect your account. It matters little that crumbs are left on the table for the short-term traders - few can exit at the top.

Smallworld -

I had a hard look at your chart of WES - particularly the August '04 situation. Could you clarify that a bit please. I would probably have exited there - what made the difference to stay with the trade? I notice the chart is a daily, and that the rally was on very strong volume.

Tony_m - I am strongly influenced by the Hull style, and can see the wisdom of trading using MA's in various forms. I use the MA's as part of my setup. However, because I am moving to CFD's, I want to become a "peace-of-mind" trader. This, for me, means avoiding the spike-type aberrations. because CFD's are leveraged, I want to avoid the dangers of the ION/SGW meltdown things.

My plan involves not using much of the available leverage at all, and staying with the trade for as long as possible. I am not suited for the fast-and-furious trades. Therefore I will simply use the CFD leverage to artificially multiply my small account base a little bit.

It looks like a weekly ATR of 2.5 to 3 would keep most traders in for the better part of the trend, and if taken out, not too much would be given back = satisfying trade.


It's much easier to ride a horse in the direction it's going - Abe Lincoln.

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stevo
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Saturday, January 22, 2005 - 09:09 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Gohard
Rather than looking at individual trades look at overall portfolio performance. I am happy to give back "too much" on an individual trade if the portfolio makes more long term. Tighter ATR multiples will cut you out of some great moves early and increase the number of trades made. Then the system will have to rely on another entry signal. It really comes down to overall approach to the markets.

smallworld - I have used a similar approach for some years to modify the ATR multiplier. Have you done any backtesting?

stevo


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smallworld
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Saturday, January 22, 2005 - 11:54 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ingot and Stevo
I actually dont use ATR as stop. I only created it after being inspired by ingot. I have never done any backtest on it. What I do use, depending on the sytem being traded, is a stop based on 180 day AMA shifted by a parameter determined by Bollinger band value. I stumbled upon it during backtesting that - a very wide stop between bollinger band squeeze gives the highest return. The situation is a little different with ATR, firstly ATR is modified by multiplication, secondly, ATR itself already measures volatility, so in the modified ATR stop, volatility is magnified by quite a bit. Hence i choose 2 X ATR instead of 2.5.
Ingot - In both charts I posted, WES would have been stopped out in August. The difference is that since August, 2.5 ATR would have you stopped out 3 times, while, 2xATR modified, have stayed below price during August.
However, there is no backtesting to demonstrates that it gives a better return.
Finally, my own thoughts on the matter of stops are
1. High tides float all boats. During a strong bull market, all stops strategies work. But during market tops, market bottom, or during bear market, stops will behave differently. its good to consider different stops during different market conditions and backtest them
2. Wide stops generally yield better return but at the same time higher drawdown and a more volatile equity curve, which is trade off one has to deal with.
3. Consider the ranking your stock in relation to the whole market to give you a better overview of your stocks performance. The ranking of your stock could be based on some kind of momentum indicator like ROC. For example, if XYZ ranked among the top 15% among the ASX 300 a month ago and was trading at 3800, and it made a new high but the ranking actually drops to the top 35%. it might be time to consider tightening your stop to take all you can, and dont give anything back.
cheers
SW

(Message edited by smallworld on January 22, 2005)


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gohard
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Saturday, January 22, 2005 - 12:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Morning Gents,
Certainly merit in the points made so far I was interested in the charts of Smallworld in that the lower Bollinger nearly gave the trailing stop loss line, was that coincidence or is there an indicator built in,what were the Bollinger settings Smallworld. Bundy refined his at one stage to show more reaction in the short term.
I am trending more to the weekly charts as previously stated it takes out the wash of daily changes but I feel you need nerves of steel with some shares to stay in the trade.
Would be a great advantage if IC is close to including the ATR indicator that could be built into the chart as is shown by Smallworld.
I will be testing other lower priced stock with the weekly ATR to see if any noticeable changes occur, I will vary the rate from 1.5-2.0, 2.0-2.5.Interestingly the Parabolic S&R followed the trade in the weeklys pretty closely, but that is another matter.
Will be in touch
Cheers G


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spider
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Sunday, January 23, 2005 - 11:01 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



spider uses a 34EMA to smooth it out.


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gohard
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Sunday, January 23, 2005 - 11:15 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Spider,
What is your 34 EMA applied to, Daily,Weekly or the ATR Daily or Weekly.
Cheers G


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ingot54
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Sunday, January 23, 2005 - 11:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Smallworld, did you mean 180 EMA? (I don't understand an AMA). If so, a 180 day ema = 36 weekly ema approx, which is close to Spider's baseline. This would certainly keep you from getting tossed out of a trade too early, but involves leaving a lot on the table at the close.

In the case of WES, if I am using the correct criteria, 34 ema, the stop on Friday was effectively 12.58% below the close of $39.10. Is this acceptable? I would not like giving back more than 8% to stay in a trade. My current thinking would rather I paid the commission to rejoin the trend, if indeed, the trend continued.

wes_1


Goliath was the best thing that ever happened to David. (Doug Weed)

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ingot54
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Sunday, January 23, 2005 - 12:11 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Now, the current ATR is approx. $0.56, and the largest recent ATR is $0.87 (11/11/04).

Taking Tony_m's bell curve maximum of 3.25 times weekly ATR, this would get us out at a stop loss range of 4.65% ($1.82) to 7.23% ($2.83) under Friday's close of $39.10.

I know this is hypothetical, but is there a happy medium here. I am leaning personally towards Tony_m's 3.25 times weekly ATR, but something tells me to wait for Spider's response before pencilling-in a Stop Loss baseline.

wes_2


Goliath was the best thing that ever happened to David. (Doug Weed)

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davkell
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Sunday, January 23, 2005 - 12:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The arguments for & against stop losses are immeasurable I think. One has to determine one's own parameters according to his system, style and goals I guess. I'm currently basing my stops on the 26week EMA, but switch to profit stops once I've gone above break-even. At the moment I'm using 7% below the highest close. 7% isn't a great deal to give back and you can always get back onboard if your system shows the trend continuing. But at least it prevents a huge downswing. I don't think I could watch a stock drop more than 10% when I'm already in profit, especially since this drop could takes weeks and might not recover!


"Trade Your Way To Financial Freedom"

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ingot54
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Sunday, January 23, 2005 - 12:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



My apologies. I should have used the WEEKLY ATR values.

This changes the figures substantially.

Range now becomes $4.61 to $5.07 (11.8% to 12.97%) if 3.25 times ATR is used.

Hmmm.

What gives?

wes_3


Goliath was the best thing that ever happened to David. (Doug Weed)

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smallworld
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Sunday, January 23, 2005 - 04:49 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Gohard,
I noticed that the Chandelier stops were tracking BB bottom and closely. its was not intentional but could be reasonable to assume that it might. It is a 20 Days SMA with bands as 2 x stdev of sma. Bollinger has in his book Bollinger on Bollinger band advocated BB bottom band as a valid stoploss. His book is well worth a read if you want to understand how bollinger bands can be used in trading.
ingot,
AMA is adaptative moving average. Essentially the moving average feeds back to the moving average itself. Its advantage over EMA is that its reaction to recent change in price is somewhat faster than EMA. I include WES with 180 AMA (orange) and EMA (blue) of the same period as an illustration of the difference between them. using 180 EMA gives too much back for me.
Difference between 180 days AMA & EMA

(Message edited by smallworld on January 23, 2005)


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tony_m
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Sunday, January 23, 2005 - 05:54 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I actually use a weekly 26 period 3.0 ATR stop in practice except from purchase until stock is in profit when I set a lower limit of -10%. The volatility based ATR stop can give variations typically ranging from about 8 to 15% or more in some cases.

So the 10% thing is about keeping my sanity as I dont think I could cope with a 15% or larger drawdown from scratch. As I said before with the focus on solid trending stocks a stoploss hit is unusual anyway, most exits are momentum based.. The last time I took a hit on entry was BSL's last dip when my timing was impeccably bad by entering just before the dip.

Looking at Smallworld's WES daily chart reminded me that at times if I have a stock which I think is looking a bit dodgy I switch the chart from weekly to daily which automatically tightens the existing weekly stoploss quite nicely.

I have daily and weekly charts here of WES here with just the stops to show the difference. The daily charts are not unlike Smallworld's with only minor differences but the differences between the weekly and daily charts show the effect of switching as I mentioned. The timeframes are roughly the same. Recently I did the switch with COA and exited on the daily when it progressively looked like the correction was going to be fairly serious.
Tony_M


w

W1

(Message edited by tony_M on January 23, 2005)


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ken
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Monday, January 24, 2005 - 12:24 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hello Smallworld,

What is the formula (in mathematical terms) for the adaptive moving average please? (if it is not something you want to keep to yourself). I haven't come across this term before.

Regards,

Ken

(Message edited by ken on January 24, 2005)


Price is the leader of the market crowd. (Elder)
Members of the crowd follow the leader and experience the same emotions as each other.
To be independent of the crowd we must not change our behaviour with price.

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smallworld
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Monday, January 24, 2005 - 12:48 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ken,
Its called Kaufman AMA that I use, my chart package has built in AMA support. Below is a set of code on another package. It you dont understand it. you may be able to search on the web for Kaufman. Cheers
----------------------
Periods := Input("Time Periods",1,1000,180);
Direction := P - Ref(P,-periods);
Volatility := Sum(Abs(C-Ref(C,-1)),periods);
Volatility:=If(Volatility>0,Volatility,0.00001);
ER := Abs(Direction/Volatility);
FastSC := 2/(2 + 1);
SlowSC := 2/(30 + 1);
SSC := ER * (FastSC - SlowSC) + SlowSC;
Constant := Pwr(SSC,2);
AMA := If(Cum(1) = periods +1, Ref(P,-1) + constant * (P - Ref(P,- 1)),PREV + constant * (P - PREV));


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spider
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Monday, January 24, 2005 - 01:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Yo ingot54,
spider mostly uses pivotal points to set his initial and subsequent stop loss points, but I do still use ATR when the pivotal points are too far away.

Here is how the evolution went.

I started out with a 10% stop loss but in practice this often meant 12% to 14% because of slippage. This tended to cheese me off somewhat.
I only discovered what was happening when I did my year end review.
At the time my 'pool' was small.
I discovered that I was 'bleeding' a significant amount of money on my loosing trades because of the slippage, this was making it harder for my winning trades to keep me in profit.

After reading "Trading Wizards" I remembered that one bloke said that he would never give up more than 7% on a losing trade, so I thought to myself "why not try 7% as a stop loss?".
But there was a more important question that I asked myself that day, "Why didn't I think of this earlier?".
Answer: because like most new traders, I did not want to admit that the trade was a loser. Even though I was employing stop losses I still hadn't thrown off the idea of 'just give it a little time and it will come back'!

Dumb , I know , but that was how my mind worked then.

I made the adjustment to 7% and never gave up more than 10% even with slippage.

This system worked well for me at the time but I needed to understand a lot more about patterns before my entries were such that I was not risking a lot at the entry point (this skill is not difficult to learn it just takes time and a lot of charts).

Like every one else , I have waded through every indicator ever invented looking for the magic one (didn't find it).

Along the way I found ATR and it instantly made sense as a tool (I've spent a large part of my working career working with tools , so I know a good one when I see one).

I started using 3ATR as a stop loss on an initial entry (when my normal pivotal point would not work).

This was on a daily chart.

The amazing thing was that it quite often turned out to be about 7%.
Not always, but often enough to be spooky.

If you stick at this long enough you will learn to 'feel' when a trade has gone pear shaped at its beginning.

Sometimes it has to do with how long it takes to reach a certain point when compared with its peers.


So many things will become clear to you if you just hang around long enough for the market to teach them to you.

ingot54, even though this post is addressed to you, my comments are of a general nature, please don't think that I am 'telling' you how to suck eggs.


For me, the goal is to be using a stop loss, this puts us above 90% of those that trade, and 99% of those that 'invest'.

Then the trick is to walk that fine line that allows the trade to move after entry but does not give away too much before we know it is time to move on to the next trade.

In general, initial entry stop losses should be judged on a daily chart, but the reasons to enter in the first place should be judged on a weekly chart.

Management of a trade in progress is ALWAYS done on a weekly chart.

Exits are decided on a mix of daily and weekly charts (a subject too large to write about here).

spider.


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ingot54
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Username: ingot54

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Monday, January 24, 2005 - 07:51 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Spider, what's an egg?

Despite my frequent posting, I still have lots to learn, and enjoy listening to successful traders. There's a kind of authority in the words of a trader who is relaxed in his method. I can identify that in several of the contributors to this thread (and elsewhere).

According to my latest draft of trading plan, I agree with the entry - select on weekly, enter on daily (looking for a pull-back). My comfort level for GSLO is 8%, when entering a trade. That may evolve with time, but I keep in mind I will be dealing with leveraged trades (CFD's) soon, and I would rather leave some profit on the table than half of my account.

I will run a few charts and see where 3 X weekly ATR puts the stops. I'm really looking for a figure I can lock up, without tweaking the thing every week.

Very helpful post Spider. Thanks.







Goliath was the best thing that ever happened to David. (Doug Weed)

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smallworld
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Username: smallworld

Post Number: 121
Registered: 01-2004

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Monday, January 24, 2005 - 08:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Just want to follow up with a RS ranking chart of WES following my mentioning of RS ranking. WES currently is on the 67 percentile among the 760+ stocks I have in my pool. its highest ranking is at 78% when it hit 40.15 in late December. The last time it was ranked 67% at the Dec low. Even though price has not fallen as much as to 36.36 (previous low). the ranking has fallen more than price.

I currently use a combination of 260 Day ROC and 65 Day ROC as my ranking criteria.


 
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