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I have already posted Expectation analysis code in amibroker-ts
group. SAR is a built-in function in AB, but I actually use
powerSAR which is a dll in AB.
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:
> Pal, how much of this have you coded in AFL, and would you be
willing to
> share it?
>
> Dave
>
> > I am of the view that one's position size would be best served
if it
> > is a function of trade risk (MaxRisk in AB) and equity rather
than
> > volatility. After finding the optimum quality (quality =
expectancy
> > * opportunities) of a system by disabling position sizing rules,
re-
> > enabling the position sizing rules will result in better
performance
> > than before, especially if the sizing is a function of trade risk
> > and equity.
> >
> > In my opinion, the market condition (trending/cyclic) does matter
> > when considering what type of stops to use and the type of stop
(SAR
> > for e.g.,) may take into account the volatility. Welles Wilder
> > Volatility Index System is such a system study described in the
> > book "New Concepts in Technical Trading Systems," Trend Research,
> > P.O. Box 128, McLeansville N.C. 27301.
> >
> > This study sets trailing stops based on a multiple of the
> > volatility. When a market or a stock gets less volatile, the
stops
> > come in closer to protect profits; when volatility increases, the
> > stops gradually expand away from the price to avoid being hit by
> > random price spikes.
> >
> > This system tends to trade less frequently than some other's and
can
> > make more per trade, with fewer commissions. Other systems may
be
> > more aggressive and make a little more in the end, but with more
> > trading.
> >
> > Wilder originated the idea of Average True Range (ATR) which
Larry
> > Williams later incorporated into almost all of his systems. The
> > Volatility Index measures the ATR and then uses a fraction of it
to
> > add or subtract from the "most significant close in a trade"
("SIC",
> > i.e.: the highest or lowest close since the position was
taken.) A
> > constant factor is then multiplied by the ATR to get the "ARC,"
or
> > Average Range times Constant. The stop-and-reverse (SAR) is
placed 1
> > ARC below the SIC if the system is long, and 1 ARC above the SIC
if
> > the system is short.
> >
> > The bottom line is that since the SAR is calculated from an
extreme
> > close, rather than from just the previous day's close, the system
> > can't miss a trend - it can be whipsawed, but if the market
starts
> > to drift on low volatility, the stops will come in tighter, and
> > reverse the trade if it goes the wrong way. Since the close
changes
> > every day, while the extreme points change only when new equity
is
> > being made, this system, based on the trade extremes rather than
the
> > daily closes, is very smooth and can stick with a trend for long
> > periods. It has the advantage over other trend followers in
that it
> > self regulates for volatility; this can reduce the lag associated
> > with moving averages and oscillators, without increasing the
false
> > signals.
> >
> > This unique and valuable indicator combines well with other
studies,
> > and allows you to filter your signals in accordance with the
trend,
> > thus enhancing accuracy and profitability while reducing
drawdown.
> > I've used this indicator for filtering both day and position
trades.
> > It works well with 15 minute, 30 minute and 1 hour charts as
well as
> > with daily charts.
> >
> > one shouldn't look at just the cross-overs for signals, this is
too
> > simplistic. One should watch the distance between the stops and
the
> > price action. When that distance becomes very wide, a snap-back
will
> > often take place instead of the trend change you might otherwise
> > expect. One should watch especially for breakout signals to
confirm
> > the true direction at these important junctures.
> >
> > When plotting Wilder's Volatility one'll need to input both a
long
> > and short factor. Wilder's original study uses the same factor
for
> > both long and short, but it is better to enter separate values.
This
> > will be useful in a market that has an established trend. Make
the
> > factor smaller in the direction of the trend. If the trend is up,
> > make the long factor a little smaller; this will bias the system
to
> > be more sensitive in that direction. The reverse rules apply in a
> > down market.
> >
> > A smaller factor makes the stops closer on that side of the
market.
> > Wilder suggests factors of 2.8 to 3.2 but there's no set rule and
> > one should experiment with different markets. It can also be
used
> > as a most excellent filter.
> >
> > Wilder suggests ATR period of 7 but you can experiment. Longer
> > periods make the indicator smoother but tend to negate the
automatic
> > volatility adjustment feature.
> >
> > rgds, Pal
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