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Mr. Valley:
It appears you are asking 2 different questions that are somewhat
related but not used in the same way: first, the Z-score as an entry filter and
a 3*ATR trailing stop in a Tharp position size statement. First, regarding the
Tharp positionsize statement, here is how you would combine a max stoploss, a
trailing profit target stop (chandelier exit), and a positionsize
statement:
Cstop = optimize(Cstop, 3,1,4,0.5); //the ATR multiplier
ApplyStop(0,2,Cstop*ATR(10),True, False); //if Cstop is 3, this would be a
3*ATR stoploss calculated from the entryprice
PositionSize = iif(Buy, -1 * BuyPrice/(Cstop*ATR(10)), -1 *
ShortPrice/(Cstop*ATR(10))); //for going long or short
ApplyStop(2,2,3*ATR(10),True, True); //this will exit you at 3*ATR below
the highest high since the trade was initiated (or lowest low on the short
side).
The Z-score, which you defined as Zscore = (C -
ref(C,-x))/stdev(C,x) sounds like it is very similar in principle to
Tharp's Efficiency Index, which is defined as EI = (C - ref(C,-x)/ATR(x). I
think the way you would use it would be as a boolean Buy (or Short) qualifier.
In other words, something like this:
Buy = <your normal buy rules> AND Zscore > y; // or
Buy = <your normal buy rules> AND EI > y; //where y is an
optimizable variable.
What this says is that you buy when the Zscore or Efficiency Index is
greater than some scalar defined from an optimization. An efficient stock is a
stock whose price movements are high relative to its volatility changes (i.e.,
the price change is high but the volatility change is minor). So, if a stock
increases by 3 points while its volatility only increases a little, that's good
because it gives you greater profitability at a given volatility. Examining the
formulas above, the positionsize is determined by the stock's underlying
volatility. If a stock has a low volatility, you would buy more of it than
another stock whose volatiltiy is higher. If its price increases without a
significant move in volatility, it is said to be efficient in regards to the
changes. If you have a stop and reverse type system, you would re-enter on the
short side at a higher price and at similar volatility as when you bought it.
Hope this makes sense.
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
Mr Valley
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Monday, December 08, 2003 10:01
AM
Subject: RE: [AmiBroker] Re: Z Score
?
<FONT face=Arial color=#0000ff
size=2>Howard,
<FONT face=Arial color=#0000ff
size=2>
I
was thinking of using it on the entry side.
<FONT face=Arial color=#0000ff
size=2>
I'm
trying to figure out them implementation of it.
<FONT face=Arial color=#0000ff
size=2>
1%
risk per position
3 *
ATR trailing exit stop
<FONT face=Arial color=#0000ff
size=2>
To
implement on Stocks and futures
<FONT face=Arial color=#0000ff
size=2>Thanks,
<FONT face=Arial color=#0000ff
size=2>Marc
<FONT face=Tahoma
size=2>-----Original Message-----From: Howard Bandy
[mailto:howardbandy@xxxxxxxxx]Sent: Monday, December 08, 2003
7:10 AMTo: <A
href="">amibroker@xxxxxxxxxxxxxxxSubject:
RE: [amibroker] Re: Z Score ?
<SPAN
>Hi Mr Valley
–
<SPAN
>
<SPAN
>I do use ZScore in
a lot of my systems. Do you have a specific Tharp idea in
mind?
<SPAN
>
<SPAN
>Howard
<SPAN
>
<DIV
>
<SPAN
>-----Original
Message-----From: Mr
Valley [mailto:valleymj@xxxxxxxxxxx] <SPAN
>Sent: Sunday, December 07, 2003 9:50
AMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: RE: [amibroker] Re: Z Score
?
<SPAN
>
<SPAN
>Thank
you.
<SPAN
>
<SPAN
>Has anyone done
anything extensive with say, combining Tharp, with Z
Score?
<SPAN
>
<SPAN
>Mr
Valley
<FONT face=Tahoma
size=2>-----Original
Message-----From:
the_chairmann [mailto:jhart_1972@xxxxxxxxx]<SPAN
>Sent: Sunday, December 07, 2003 7:17
AMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: [amibroker] Re: Z Score
?
<SPAN
>Here's the indicator
formula:<SPAN
><FONT
face="Courier New">periods=20;<FONT
face="Courier New">ZScore=(Close-MA(Close,20))/StDev(Close,20);<FONT
face="Courier New">Plot (MA(ZScore,3), "Z-Score 3 Day
MA",6,4);Plot
(MA(MA(ZScore,3),5), "5 Day MA Z-Score
MA",5,4);--- In
amibroker@xxxxxxxxxxxxxxx, "Mr Valley" <valleymj@xxxx>
wrote:> Has anyone coded Z
Score Transformation Exploration in .afl?<FONT
face="Courier New">> <FONT
face="Courier New">>
Score - Mean<FONT
face="Courier New">> Z =
--------------------<FONT
face="Courier New">>
Std Deviation>
>
Thanks,>
> Mr.
Valley<FONT
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