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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. J
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
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@xxxxxxxxnet> 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.
From:
amibroker@xxxxxxxxxps.com [mailto:amibroker@yahoogroups.com] On Behalf Of a a
Sent: 02/20/2007 2:52 AM
To: amibroker@xxxxxxxxxps.com
Subject: RE: [amibroker] Can this
be done
Thanks for your help. Do you have any suggestions on how the
trading strategy can be further improved upon.
Thanks.
dbw451
<dbw451@xxxxxxxxnet> 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);
I don’t think AI software is
needed for what you want to do.
From:
amibroker@xxxxxxxxxps.com [mailto:amibroker@yahoogroups.com] On Behalf Of swptec
Sent: 02/19/2007 1:57 AM
To: amibroker@xxxxxxxxxps.com
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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