The exit of a trade: how? when? where?

[Grey1]

There is no research evidence of scaling in or out to give a significant edge in a long term portfolio but one can prove me wrong in one or two example,. There is however a substantial evidence to set 1 ATR as Break even point below which NO winning trade MUST BE ALLOWED TO GO ,,,

The major dis advantage of scaling of any type is that traders donot realise every change in postion sizing is a NEW Trade and must be acted upon on it own MERIT.

I am currently in short TMA and added to my short postion . The addtion of the postion was soley an execution reason and not a money management issue ..

Grey1

 

[black bear]

There is no research evidence of scaling in or out to give a significant edge in a long term portfolio but one can prove me wrong in one or two example,. There is however a substantial evidence to set 1 ATR as Break even point below which NO winning trade MUST BE ALLOWED TO GO ,,,

The major dis advantage of scaling of any type is that traders donot realise every change in postion sizing is a NEW Trade and must be acted upon on it own MERIT.

I am currently in short TMA and added to my short postion . The addtion of the postion was soley an execution reason and not a money management issue ..

Grey1

Hi Grey 1

Thanks for that, sorry for being daft , Im only a painter brain don"t do abbreviations at all

"substantial evidence to set 1 ATR as Break even point"

Explain please, sorry

 

[Grey1]

Hi Grey 1

Thanks for that, sorry for being daft , Im only a painter brain don"t do abbreviations at all

"substantial evidence to set 1 ATR as Break even point"

Explain please, sorry

It means to have a break even point of 1 ATR .

Example

Lets say you are trading AAPL and you choose to have a stop loss of 1ATR and a target of 3ATR ( you can use 10 min to measure ATR ) ..

Lets say AAPL ENTRY is 169$
lets say 10 MIN ATR for AAPL is 50C

then you stop loss if it hits 168.50 and put a break even point of $ 169.50 with a target being $170.50.. If the trade went for you and it met your target then fair enough if not then you must close @ 169.50 if you appracoached the target but for some reason the stock pulled back .

Does this explain?

Grey1

 

[Trader333]

ATR stands for Average True Range and is a measure of market volatility. An an example, a daily ATR for an instrument that has had a high of $34 and a low of $33 is the difference of the two which is $1. Typically it is measured over 14 periods in the time frame that you are trading.



Paul

 

[firewalker99]

There is no research evidence of scaling in or out to give a significant edge in a long term portfolio but one can prove me wrong in one or two example,. There is however a substantial evidence to set 1 ATR as Break even point below which NO winning trade MUST BE ALLOWED TO GO ,,,

The major dis advantage of scaling of any type is that traders donot realise every change in postion sizing is a NEW Trade and must be acted upon on it own MERIT.

I am currently in short TMA and added to my short postion . The addtion of the postion was soley an execution reason and not a money management issue ..

Grey1

Thanks Grey1 for your input on this matter. Most appreciated.

I have tweaked and played with several settings, moving my stop up to breakeven or a certain factor of the ATR of the market. In most cases - at least over the long term - it showed to be more profitable moving my stop to BE + 1x ATR after the trade had moved a certain number of points in my favour.

However, you say there is "substantial evidence"... do you mean that you have found studies/statistics on this matter? If anybody should know, I guess it's you

Any advice/insights are welcome.

Also, when you say 1x ATR... each trader will probably use a different setting right? How does that compensate for the 1x ATR "rule"?

 

[Grey1]

Thanks Grey1 for your input on this matter. Most appreciated.

I have tweaked and played with several settings, moving my stop up to breakeven or a certain factor of the ATR of the market. In most cases - at least over the long term - it showed to be more profitable moving my stop to BE + 1x ATR after the trade had moved a certain number of points in my favour.

However, you say there is "substantial evidence"... do you mean that you have found studies/statistics on this matter? If anybody should know, I guess it's you

Any advice/insights are welcome.

Also, when you say 1x ATR... each trader will probably use a different setting right? How does that compensate for the 1x ATR "rule"?

Yes there has been a great amount of work done on volatility especially in option pricing and how to use the information to set an objective exit for a trade. The research does not include ATR as this is not the bases for advanced modeling but ATR is a good start ,,

Now,,, It really does not matter what time frame you choose as long as BE, STOPLOSS and TARGET uses the same time frame. The choice of Time frame comes from

1) your capital
2) risk management ( basket trading ) or just one single stock at a time
3) Portfolio management. How much return you expect from your investment /Year
4) OTHERS

Did I answer your question ?

Ps:-- I can send you the result and evidence of few 100 recent tests on BE = 1ATR to support my argument with all trades automatically executed on my own IB account w with p/L .. No back testing .. if yes let me know so i can dig them out for you as they go back to few weeks ago

grey1

 

[Glenn]

a daily ATR for an instrument that has had a high of $34 and a low of $33 is the difference of the two which is $1. Typically it is measured over 14 periods in the time frame that you are trading.



Paul

It's a bit more complicated than that Paul
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:average_true_range_atr

Glenn

 

[black bear]

Yes there has been a great amount of work done on volatility especially in option pricing and how to use the information to set an objective exit for a trade. The research does not include ATR as this is not the bases for advanced modeling but ATR is a good start ,,

Now,,, It really does not matter what time frame you choose as long as BE, STOPLOSS and TARGET uses the same time frame. The choice of Time frame comes from

1) your capital
2) risk management ( basket trading ) or just one single stock at a time
3) Portfolio management. How much return you expect from your investment /Year
4) OTHERS

Did I answer your question ?

Hi Grey 1 & FW & glenn sorry nipped out so late to post reply.

Thanks for that much appreciated , Yes it did very well

I have messed about, which is a fair discription of my trading with regards to this aspect.

I am always (instinct at work) reluctant to take a loss when a position as become profitable and then starts to come back at me I no its part of the game but well always close and look for a re-entry, always. I am often undecided (not being very good with the back testing) if or what is the correct way of dealing with situation. When moving a trade to break even always been a bit , sorry to say hap hazard affair.

Thanks again, a great help thanks for link glenn

 

[Trader333]

Yes I know it is Glenn, I was just trying to make the basic explanation very simple by basing it on a 1 day ATR as that is easy to calculate. I am aware of the complexity for longer time frames but I take your point that it may have appeared too simple.


Paul

 

[black bear]

Yes I know it is Glenn, I was just trying to make the basic explanation very simple by basing it on a 1 day ATR as that is easy to calculate. I am aware of the complexity for longer time frames but I take your point that it may have appeared too simple.


Paul

No problem , I get the general idea , will swot up

Thanks

 

[fibonelli]

I can't believe that no one's mentioned the SuperTrend indicator.

 

[black bear]

good post

I can't believe that no one's mentioned the SuperTrend indicator.

Hi Fib,

I have looked at that not traded with it have you :?:

I use 3 time frames to set trade up anyway and think probably suits that approach, you can see easy if not used to 3 time frames approach at glance what they are all doing.

welcome any feed back on it, looks good perhaps to convince you, you are right if you no what I mean

 

[black bear]

I can't believe that no one's mentioned the SuperTrend indicator.

Hi Fib,

I have looked at that not traded with it have you :?:

I use 3 time frames to set trade up anyway and think probably suits that approach, you can see easy if not used to 3 time frames approach at glance what they are all doing.

welcome any feed back on it, looks good perhaps to convince you, you are right if you no what I mean

Hi fibonelli,

Blue line = week High & Low

Purple = open hour range

grey = trend line 4 hrs

enclosed one chart hours, sorry would not upload 3 screen view

 

[Splitlink]

Hi fibonelli,

Blue line = week High & Low

Purple = open hour range

grey = trend line 4 hrs

enclosed one chart hours, sorry would not upload 3 screen view

Trendline?

 

[black bear]

Trendline?

Thank you once again, a thousand thank you"s in fact, and just for you, a blast from the past ~


Trendlines, to me, are drawn arbitrarily. I just use them as a sort of "comfort line". If I am on the right side of it I feel fine and have no worries. The rule that they must be drawn across the tops or bottom is, more or less, telling the market what to do. How can you expect that of a price? When the price cuts the trend I look to see if a pattern is forming. If the pattern is continuous, I revert to a trendline, again, almost certainly, the momentum will have changed but if I keep to the right of it in a bear and to the left of it in a bull then I am OK- Whenever it crosses, it is a warning to pay attention to the trade, nothing more.

There is nothing to be learned from trendlines, IMO anyway, except to help keep the ship on course. Go inside it and you are entering into shallow water.

BY

Split