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If you are trading a trending or swing type system, try scaling out with two
targets. The first target is to capture a small profit and move your stop
to breakeven once triggered. This guarantees the trade will be profitable
once the first target is hit. The second target should be a logical distant
target at something like a fib number, support or resistance, or a previous
swing high or low. Once price moves significantly towards the second target
(maybe ½ to ¾ of the way), change your breakeven stop to a trailing stop
using SAR or an MA or a few ticks above/below the previous bar on a 5x
higher timeframe (e.g. 1 minute timeframe would be 5 minute bars, 1 day
would be weekly, etc.). The trailing stop allows you to lock in some of the
larger profit and if the market is trending well it will reach your second
target. If the market pulls back and takes out your trailing stop, so what?
You?ve locked in profit, start searching for the next trade. The second
target should be at least 2x your initial stop size and preferably 3x or
more.
Once the first target is hit and your market or stock is trending well, you
have the option of taking a new entry signal with half your usual position
size and adjusting the second target further out. You can essentially take
several smaller target 1 trades while riding a big trend to your distant
target.
Finally, implement a time based stop (note: this is not an n-bar stop). A
time based stop exits the trade at market if the entry is not profitable
within a predefined amount of time. If the trade is profitable at the
predefined time, the time based stop is ignored. This one trade management
technique enhances a system?s performance more than any other that I?ve
tested.
This should give you plenty things to think about and test. :-)
Regards,
David
_____
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of a a
Sent: 02/21/2007 5:49 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] Can this be done
Hi David,
Thank you for your excellent reply. You have hit the nail on the head. I do
manage my entries well but the exit is a problem. I have been toying with
parabolic SAR. Ema 3,6 crossover etc. but have not been able to find a sell
strategy which manages to differentiate between a bull-trap and an exit.
Many times prices decline only to go back to new highs (i.e bull trap) and
then one feels stupid for selling and at other times the decline is for
real.
Any ideas on this problem?
Thanks.
dbw451 <dbw451@xxxxxxxxxxx> wrote:
Wow, that?s a loaded question. I?m not overly familiar with the RSI
indicator, so I can?t offer specific suggestions about what you?re trying to
do. However, I can say that in general a system based on a single indicator
is only profitable when the market is conducive to that type of indicator.
For an oscillating indicator like the RSI, the market either needs to be
ranging or in a pull-back of a trend for the oscillator to be useful.
Trying to buy an oversold oscillator in a down trending market is a recipe
for disaster. Identifying market conditions is the hardest part of
trading, IMHO. You need to decide if your system is ranged based or trend
based and focus on identifying when the market is conducive to your system.
In other words, focus on what?s going on in the left hand side of your
chart.
The golden rule of trading is ?cut your losses short and let your profits
run?. If you think about it, the golden rule is primarily about where to
exit a trade. If you put your focus on exits rather than entries, you?ll be
much better off. Good entries are important, however it?s been proven that
a coin flip entry with tight stops and good profit management can be a
profitable system. All that?s needed to win this game is a positive
expectation system and the discipline to follow it. Chapter 5 of Van K
Tharp?s ?Financial Freedom through Electronic Day Trading? is the best write
up I?ve read on the golden rule and system expectations. The book also has
a great chapter on how to write a trading plan. These two topics apply to
any type of trading (i.e. day, swing, etc.).
Best of luck in your trading education.
Regards,
David
_____
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of a a
Sent: 02/20/2007 2:52 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] Can this be done
Hi David,
Thanks for your help. Do you have any suggestions on how the trading
strategy can be further improved upon.
Thanks.
dbw451 <dbw451@xxxxxxxxxxx> wrote:
AmiBroker can do this very well and you have a good backtesting strategy.
AB?s optimization basically iterates a variable over a range of values. For
each variable you want to optimize, you specify a starting, ending, and
increment value. An AFL example would be:
dRSIvalue = Optimize("RSI value", 14, 4, 30, 1);
dRSI = RSI(dRSIvalue);
I don?t think AI software is needed for what you want to do.
Regards,
David
_____
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On Behalf
Of swptec
Sent: 02/19/2007 1:57 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Can this be done
Hi,
I am new to Amibroker and don't know even if I am wording my question
properly.
I want to optimize an indicator (say) like RSI for (say) a two year
period from Jan 2003 to Jan 2005 and then do an out of sample backtest
for the optimized indicator for the period Feb 2005 to Jan 2007.
Can such a thing be done?
Is it worth while trying such things?
Am I better of buy some Artificial Intelligence s/w for this purpose?
Thanks.
_____
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