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Hi,
I can envision some problems with this Bollinger Breakout system.
1) It is extremely diffcult for one to make a determination of the
direction of the market based on volatility (HVR, BandWidth etc.,)
alone without a good Entry/Exit Trading signal Detection System.
Hence you may have to straddle the market.
2) Suppose you go long above the upper band and you place a sell
stop below the lower band (straddle) and vice-versa and you get
filled on both sides....
You may get away with this system by placing your stop not just
above/below the bands but at for e.g., at Gann's support and
resistance points, because these points once they are breached
reverse their function (support becomes resistance and resistance
becomes support).
I would be interested in knowing more about this system....
Thanks.
Regards,
Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx> wrote:
> Pal,
>
> There is a trading system used by some traders called the Bollinger
Breakout System. It is similar to what DT has proposed. You buy when
the upper band is exceeded plus a small additional amount (opposite
for shorting). However, the standard deviation bands are much smaller
than the usual +/- 2. Usually, they are around +/- 0.4 or so. So, the
bands are quite a bit narrower and are used as breakout bands rather
than the usual rebound bands or support/resistance levels where one
sells at the top of the upper band and buys at the bottom of the
lower band. Just a different way of looking at things. It's a
volatility breakout system of sorts. By the way, the exit is the
opposite of the entry: sell at the breakout from the lower band (if
long originally).
>
> AV
> ----- Original Message -----
> From: palsanand
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Wednesday, September 24, 2003 1:03 PM
> Subject: [amibroker] Re: The Reverse Engine Bollinger Bands
Problem, IV
>
>
> Hi,
>
> I would characterize your definition of upper or lower breakout
as a
> continuation signal not a breakout.
>
> In my opinion an upper breakout always starts from the lower
Bband
> and a lower breakout always starts from the upper Bband. The
trick
> there is to find that particular value of the Z-Score (+/-2)that
will
> detect the breakout or counter-trend pullback. It is made much
> easier by calculating a range of Z-Scores with different moving
> averages (2-21) & performing a check on it using StochZ(50) &
StochZ
> (200).
>
> The Bollinger Bands are Standard Deviation Bands. It's
superiority
> is in showing your investments volatility along with the likely
> support and resistance areas (Z=0). The extremes of the band (+/-
2)
> are considered "unusual". Every time you see an investment reach
the
> extremes, it is said to be at the "Bollinger Band". However, it
is
> also a key turning point. The price can be expected to be
anywhere
> within the 95% confidence band at any time. The moment the
> investment hits the extremes, it is now statistically significant
and
> something has caused this new valuation and it is time to search
for
> a signal using your favorite Entry/Exit Trading Signal Detection
> system.
>
> But, sometimes a breakout becomes a counter-trend pullback & vice-
> versa. The trick there is to detect the volatility. You may
find
> that the volatility characteristics are quite different for these
two
> types of market conditions.
>
> Regards,
>
> Pal
> --- In amibroker@xxxxxxxxxxxxxxx, "Dimitris Tsokakis"
<TSOKAKIS@xxxx>
> wrote:
> > Here is an application of the method.
> > Suppose we trade BBands and suppose we buy at the upper
breakout
> and sell some, say 8, days later.
> > The usual code would be, from 1/1/2003 till now
> >
> > // Without the method
> > t=8;
> > Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);
> > SetTradeDelays( 1, 1, 1, 1 ) ;
> > e2=Equity(1,3,1030101,1030924);
> >
> > where bt is the BBandTop(C,n,f) upper Bollinger Band
> > Buy/Sell at Open with delay +1.
> >
> > Now we know in advance the critical level X1 to have a BB
breakout
> tomorrow.
> > We may use it as a BuyPrice and set Buy delay to 0.
> > The new system would be
> >
> > // With the method
> > t=8;
> > Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-
t);BuyPrice=Ref
> (x1,-1);
> > SetTradeDelays( 0, 1, 1, 1 ) ;e1=Equity(1,3,1030101,1030924);
> >
> > The att. gif gives an outline of the improvement.
> > Of course, nothing is free in this world, we have to decide,
when
> the price reach the critical level X1, that it will close
higher !!
> > Explore the database for the n=1 last quotations with
> >
> > n=10; f=2;
> > Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);
> > Sn=Sum(C,n);Sn_1=Sum(C,n-1);
> > Mn=Sn/n;Mn_1=Sn_1/(n-1);
> > Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);
> > bb=Mn-f*Kn;bt=Mn+f*Kn;
> > S=Sn_1;Q=Qn_1;
> > A2=(n-1)*(f^2-n+1);
> > A1=-2*(f^2+1-n)*S;
> > A0=f^2*n*Q-f^2*S^2-S^2;
> > x1=(-A1-sqrt(A1^2-4*A2*A0))/(2*A2);
> > x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);
> > Plot(C,"C",1,8);
> > Plot(X1,"",colorBlue,1);
> > Plot(X2,"",colorBlue,1);Plot(bb,"BBandBot",7,1);Plot
> (bt,"BBandTop",7,1);
> > PlotShapes(shapeDownTriangle*Cross(x2,Ref(C,1)),colorPink);
> > PlotShapes(shapeDownArrow*(Cross(bb,C)),colorRed);
> > PlotShapes(shapeUpTriangle*Cross(Ref(C,1),x1),colorAqua);
> > PlotShapes(shapeUpArrow*(Cross(C,bt)),colorBrightGreen);
> > Title="The next "+Name()+" Close should be "+"\n
*below"+WriteVal
> (x2)+" [ "+WriteVal(100*(-1+x2/C))+"% ] for a BBandBot Cross"+
> > "\n *above"+WriteVal(x1)+" ["+WriteVal(100*(-1+x1/C))+"% ] for
a
> BBandTop Cross"+
> > "\n Actual Next Close = "+WriteIf(Cum(1)!=LastValue(Cum
> (1)),WriteVal(Ref(C,1)),"?");
> > t=8;
> > // With the method
> > Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);
> > BuyPrice=Ref(x1,-1);
> > SetTradeDelays( 0, 1, 1, 1 ) ;
> > e1=Equity(1,3,1030101,1030924);
> > // Without the method
> > Buy=Cross(C,bt);Buy=ExRemSpan(Buy,t);Sell=Ref(Buy,-t);
> > SetTradeDelays( 1, 1, 1, 1 ) ;
> > e2=Equity(1,3,1030101,1030924);
> > Filter=e1>e2;
> > AddColumn(e2,"e Without");
> > AddColumn(e1,"e With");
> > AddColumn(100*(-1+e1/e2),"Profits % Increment");
> >
> > to get an idea of probable applications.
> > Dimitris Tsokakis
> >
> >
> >
> >
> >
> > ----- Original Message -----
> > From: Dimitris Tsokakis
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Tuesday, September 23, 2003 1:15 PM
> > Subject: Fw: The Reverse Engine Bollinger Bands Problem, III
> >
> >
> > If you expect a BBandBot(C,10,3) to cross CSCO Close, perhaps
you
> should wait for long.
> > This type of cross never occurred the last 45 months !!
> > There are some resctrictions in BBandbot(C,n,f) parameters.
> > A. f upper limit
> > For a given n, the values of f are limited.
> > This limit is not universal, it varies from stock to stock.
> > In AA window, explore the current stock for the last n=1 bars
with
> >
> > // f upper limit for a given n
> > // Explore ONLY current stock, n=1 last quotations
> > SetOption ("NoDefaultColumns" ,True);
> > AddTextColumn(Name(),"Name");
> > n=10;
> > for(f=1.5;f<=3;f=f+0.1)
> > {
> > b=BBandBot(C,n,f);
> > x=Cross(b,C);y=LastValue(Cum(x));
> > if(y>0)
> > {AddColumn(y,"f="+WriteVal(f,1.1),1.0);}
> > }
> > Filter=1;
> >
> > You may see the # of Cross(b,C) per f value. the last column
gives
> the upper limit of f for a given n.
> > For the database it is better to use the code
> >
> > // f upper limit for a given n
> > // Explore the database for the n=1 last quotations
> > SetOption ("NoDefaultColumns" ,True);
> > AddTextColumn(Name(),"Name");
> > n=10;
> > for(f=1.5;f<=3;f=f+0.1)
> > {
> > b=BBandBot(C,n,f);
> > x=Cross(b,C);y=LastValue(Cum(x));
> > AddColumn(y,"f="+WriteVal(f,1.1),1.0);
> > }
> > Filter=1;
> >
> > For the N100 database no stock exceeded f=3 since Jan2000.
> >
> > B. n lower limit
> > For a given f there is a lower limit for n, also variable from
> stock to stock.
> >
> > // n lower limit for a given f
> > // Explore the database for the n=1 last quotations
> > SetOption ("NoDefaultColumns" ,True);
> > AddTextColumn(Name(),"Name");
> > f=2.5;
> > for(n=3;n<20;n=n+1)
> > {
> > b=BBandBot(C,n,f);
> > x=Cross(b,C);y=LastValue(Cum(x));
> > AddColumn(y,"n="+WriteVal(n,1.0),1.0);
> > }
> > Filter=1;
> >
> > You will see that n should be greater than n=8 for a probable
Cross
> (b,C)
> >
> > C. fmax for various n
> > For your BBandBot parameters selection you should know the fmax
for
> various n.
> > // fmax for various n
> > SetOption ("NoDefaultColumns" ,True);
> > AddTextColumn(Name(),"Name");
> > for(n=10;n<210;n=n+10)
> > {
> > for(f=1.5;f<=5;f=f+0.1)
> > {
> > b=BBandBot(C,n,f);
> > x=Cross(b,C);y=LastValue(Cum(x));
> > if(y>0)
> > {fmax=f;}
> > }
> > Filter=1;// explore for the n=1 last quotations.
> > AddColumn(fmax,"n="+WriteVal(n,1.0),1.1);
> > }
> >
> > In the attached gif you may see the fmax distribution for a
group
> of stocks [test period Jan2000 till now]
> > It is better to know the mutual f,n limitations before using
the
> Reverse Engine BBands mechanism.
> > Dimitris Tsokakis
> >
> >
> > ----- Original Message -----
> > From: Dimitris Tsokakis
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Monday, September 22, 2003 1:53 PM
> > Subject: The Reverse Engine Bollinger Bands Problem, II
> >
> >
> > Here is the complete IB formula for BBandTop, BBandbot.
> >
> > // Anticipating the next bar BBandBot or BBandTop cross, by D.
> Tsokakis, Sept 2003
> > n=20; f=2;
> > Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);
> > Sn=Sum(C,n);Sn_1=Sum(C,n-1);
> > Mn=Sn/n;Mn_1=Sn_1/(n-1);
> > Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);
> > bb=Mn-f*Kn;bt=Mn+f*Kn;
> > S=Sn_1;Q=Qn_1;
> > A2=(n-1)*(f^2-n+1);
> > A1=-2*(f^2+1-n)*S;
> > A0=f^2*n*Q-f^2*S^2-S^2;
> > x1=(-A1-sqrt(A1^2-4*A2*A0))/(2*A2);
> > x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);
> > Plot(C,"C",1,8);
> > Plot(X1,"",colorBlue,1);
> > Plot(X2,"",colorBlue,1);Plot(bb,"BBandBot",7,1);Plot
> (bt,"BBandTop",7,1);
> > PlotShapes(shapeDownTriangle*Cross(x2,Ref(C,1)),colorPink);
> > PlotShapes(shapeDownArrow*(Cross(bb,C)),colorRed);
> > PlotShapes(shapeUpTriangle*Cross(Ref(C,1),x1),colorAqua);
> > PlotShapes(shapeUpArrow*(Cross(C,bt)),colorBrightGreen);
> > Title="The next "+Name()+" Close should be "+"\n
*below"+WriteVal
> (x2)+" for a BBandBot Cross"+
> > "\n *above"+WriteVal(x1)+" for a BBandTop Cross"+
> > "\n Actual Next Close = "+WriteIf(Cum(1)!=LastValue(Cum
> (1)),WriteVal(Ref(C,1)),"?");
> >
> > The formula gives quite accurate results. Sometimes it is
useful.
> > At point Z1, the price should be below 13.845 and the next bar
> close was 13.840.
> > At point Z2, the price should be above 20.840 and the next bar
> close was 20.850.
> > From the mathematical point of view, both crosses come from the
> same 2nd degree equation A2*X^2+A1*X+A0=0
> > Dimitris Tsokakis
> > [to be continued]
> >
> > ----- Original Message -----
> > From: Dimitris Tsokakis
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Monday, September 22, 2003 11:26 AM
> > Subject: The Reverse Engine Bollinger Bands Problem
> >
> >
> > What is the necessary next bar Close to see prices below the
next
> bar BBandbot ?
> > Steve Karnish is responsible for the question [and
> the ...headache], some time ago.
> > The following code is dedicated to him.
> > Paste in IB the
> >
> > // Anticipating the next bar BBandbot cross, by D. Tsokakis,
Sept
> 2003
> > n=10;
> > f=2;
> > Qn=Sum(C^2,n);Qn_1=Sum(C^2,n-1);
> > Sn=Sum(C,n);Sn_1=Sum(C,n-1);
> > Mn=Sn/n;Mn_1=Sn_1/(n-1);
> > Kn=(1/n)*sqrt(n*Qn-Sn^2);Kn_1=(1/(n-1))*sqrt((n-1)*Qn_1-Sn_1^2);
> > b=Mn-f*Kn;
> > S=Sn_1;Q=Qn_1;
> > A2=(n-1)*(f^2-n+1);
> > A1=-2*(f^2+1-n)*S;
> > A0=f^2*n*Q-f^2*S^2-S^2;
> > x2=(-A1+sqrt(A1^2-4*A2*A0))/(2*A2);
> > Plot(X2,"",colorBlue,1);Plot(C,"C",1,8);Plot(b,"BBandBot",7,1);
> > PlotShapes(shapeUpArrow*Cross(x2,Ref(C,1)),colorWhite);
> > PlotShapes(shapeDownArrow*(Cross(b,C)),colorRed);
> > Title="The next "+Name()+" Close should be <="+WriteVal(x2)+
> > "\nActual Next Close = "+WriteIf(Cum(1)!=LastValue(Cum
(1)),WriteVal
> (Ref(C,1)),"?");
> >
> > The solution is the X2 array.
> > For visual verification, a white arrow is plotted when the X2
> crosses the next bar close and a red arrow points the actual
cross.
> >
> > Dimitris Tsokakis
> > [to be continued]
>
>
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