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3BSMA stop - 3 Bar Simple Moving Average Stop
Plot(MA(C,3),"MA3",colorWhite,1);
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "nkis22" <nkishor@xxxx> wrote:
>
> Interesting, though I do not know what is 3BSMA stop.
>
> nand
>
> --- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx>
wrote:
> > Hi All,
> >
> > I have been searching for an effective stopping methodology for a
> > very long time (since I began trading). I experimented with
> several,
> > like all kinds of MA based stops, Gann's Rule of Eights stop, ATR
> > based stops etc., I finally may have found a good one. It is
based
> > on the theory that there are essentially two types of markets:
> > Trending and Trading Range. An instrument does not start a new
> trend
> > immediately after ending the previous trend. It might go into a
> > consolidation phase (Trading Range) before starting a new trend.
> The
> > problem is to time this start of a new trend. Sometimes we have
to
> > wait for a long time indeed, thus if we enter the market too
soon,
> we
> > get whipsawed. To solve this problem, I came out with the
> > following: Use a "mental stop" on day of entry at a reasonable
> > distance from your entry point. Either an ATR based stop or a
> pivot
> > point support/resistance based stop would suffice and exit only
> after
> > 20 minutes has passed since your mental stop is exceeded and you
> are
> > still losing. Use a 3BSMA stop during the initial stages (from
> next
> > session after entry when the start of a new trend is still not
yet
> > confirmed) in accordance with the principle: Cut your losses
short.
> >
> > Plot(MA(C,3),"MA3",colorWhite,1);
> >
> > Once, a new trend has started (confirmed by LinRegReveral
Indicator
> > and/or Zig-Zag trend indicator) and powerSAR has also confirmed
the
> > new trend, use the following stop in accordance with the
principle:
> > Let your profits run.
> >
> > Plot(scPowerSar(0.02,0.01,0.2),"PowerSAR",-16,8+16);
> >
> > (You need AB's dll's to use this function)
> >
> > SAR is the Stop and Reverse system developed by Welles Wilder.
> This
> > system indicates where one should exit a trade and simultaneously
> > reverse positions. It may also be coded to provide a stop for
> > tomorrow's trading action. This function does not work with
> > Equivolume chart.
> >
> > This provides a systematic way to set a stop order. The stops
are
> > changed daily and are adjusted to suit the market's conditions.
It
> > also keeps you constantly in the market. When one gets stopped
> out,
> > you are also to initiate a trade in the opposite direction (In
> > reality, you would already may have gotten a reversal signal and
> may
> > be already trading it using a 3BSMA stop). This is generally
used
> by
> > futures and forex traders. Stock traders could of course short
the
> > stock however, one could also just buy stock and sell it without
> > shorting it. Then when the next buy signal occurs, jump in
again.
> > This can be quite useful during trending markets however, it is
> > practically useless in trendless conditions (I use Dr. John F.
> Ehlers
> > Squelch functions to distinguish between trending and trading
> ranges)
> > or when the price is consolidating. One can get whip-sawed and
> make
> > several losing trades under these trendless conditions.
> >
> > This function is inherently a trend-following study. It
increases
> > the stop level each successive day until the 10th day that the
> market
> > is still trending. At this point, it raises the stop level
> > proportionally daily. This is due to the observed fact that 10-
day
> > runs are extremely rare. These long runs do occur however they
> only
> > occur around 5% of the time. So this works magnificiently in
> trends
> > and miserably in congestion or consolidation periods, but works
> well
> > when combined with a 3BSMA stop during the initial stages (when
the
> > start of the new trend is not yet confirmed and you want a tight
> stop
> > just in case the new trend did not start. Doesn't mean that you
> were
> > wrong in trading it, just that sometimes it takes a long time for
a
> > new trend to develop and most people don't have the guts to buy
> when
> > everybody else is selling and sell when everybody else is buying
> and
> > that is one of the reason most traders lose and ofcourse they may
> > also lack patience and also adequate capitalization, money-
> management
> > (PositionSize, MaxOpenPos, MaxRisk, PositionScore etc.,))
> >
> > Any feedback appreciated. TIA.
> >
> > rgds, Pal
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