How to Grade Your Performance using Channels (by dr. A. Elder)

[pirx]

Hello!

In his book, Come Into My Trading Room, dr. Alexander Elder offers a good way for grading the quality of our trades.

A quote from C.I.M.T.R.:

"When you enter a trade, measure the height of the channel from the upper to the lower line. If you use daily charts to find trades, measure the daily channel; if you use a 10-minute chart, measure the channel on a 10-minute chart; and so on. When you exit that trade, calculate the number if points you´ve taken as a percentage of the channel. That is your performance grade."

The only thing which is not mentioned is on what type of channels did he think. As you know, there are quite a few of them - from Trend, MA, Bollinger Band to Keltner Channels and so on.

So I wonder, if he did not specify the type of channel, can his method be applied to any type of channel? What do you think?

Thanks!

 

[Vorbis]

So I wonder, if he did not specify the type of channel, can his method be applied to any type of channel? What do you think?

Thanks!

Hi Pirx,

I could be wrong but I've just finished reading this book and I think he was referring to simple Envelopes, adjusted to include 95% of the price movement.

I'm sure he said at some point that Bollinger bands are not as useful because of their variable width.

From experimenting myself, I think that trend-lines can be used but only if the graph is pretty uniform across its length. Does that make sense?

Having said all that, I'm still a beginner so hopefully someone with more experience may be able to help!

 

[hungvir]

Hello!

In his book, Come Into My Trading Room, dr. Alexander Elder offers a good way for grading the quality of our trades.

A quote from C.I.M.T.R.:


The only thing which is not mentioned is on what type of channels did he think. As you know, there are quite a few of them - from Trend, MA, Bollinger Band to Keltner Channels and so on.

So I wonder, if he did not specify the type of channel, can his method be applied to any type of channel? What do you think?

Thanks!

I also have the book, but haven't finished reading it I think what he says makes sense when the market ket is in a trading range, rather than trending.

 

[pirx]

I could be wrong but I've just finished reading this book and I think he was referring to simple Envelopes, adjusted to include 95% of the price movement.

Hi Vorbis,

Thanks for your answer. I´ve also got the impression, that he was thinking on simple MA Envelopes, but I wasn´t sure. I´ll just stick to that

I think what he says makes sense when the market ket is in a trading range, rather than trending.

Hello Hungvir,

Thanks for answering. I guess you can use the MA Envelopes in any type of market to help you grade your performance. He just indicated, that you should not always use the channel borders as a profit taking point, when there is a strong trend in the stock you are monitoring.

If either of you is going to try to install some of his indicators in MetaStock, let me know, I can help you find the necessary formulas.

Happy trading!