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[amibroker] Re: Pyramiding / ScaleIn Questions


  • Date: Sun, 21 Feb 2010 04:52:00 -0000
  • From: "Richard" <richpach2@xxxxxxxxx>
  • Subject: [amibroker] Re: Pyramiding / ScaleIn Questions

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Howard, Thank you for your comprehensive answer. 
Regards, Richard

--- In amibroker@xxxxxxxxxxxxxxx, Howard B <howardbandy@xxx> wrote:
>
> Hi Richard, and all --
> 
> I categorize exits in several general ways.
> 
> 1.  The exit from the logic of the trading system.  This is usually the best
> exit.
> 
> Exits that can be good include:
> 2.  Exit caused by a trailing stop that follows the price movement in the
> direction of the trade -- the stop portion of the Parabolic Stop And Reverse
> or the Chandelier stop as examples.  This is often an excellent exit for a
> trend-following system.  It requires a few bars in the trade for the exit
> level to catch up to the price, so this is best used with trades that hold
> at least a few bars.  It works with daily or intra-day bars.
> 3.  Exit caused by a profit target being met.  This is often an excellent
> exit for a system that holds only a few bars and is never looking for the
> big win.  In order to be a valid exit, the profit target must be the exit a
> substantial portion of the exits -- cherry picking is not allowed.
> 4.  Exit caused by a time limit running down.  This could be a stop strictly
> based on time, as in holding a maximum number of bars.  Or it could be an
> inactivity exit, as in exit when there has not been favorable price movement
> within some number of bars.
> 
> The poorest exit:
> 5.  Exit because a maximum loss limit has been reached.  This is the exit of
> last resort.  It is easy to test yourself.  Beginning with any trading
> system, add a maximum loss stop using the ApplyStop function.  Set the limit
> so far away that it is never hit and run a backtest.  Gradually bring the
> stop closer.  Note the system performance as the loss point is closer to the
> entry and the maximum loss stop is hit a greater percentage of the time.
> System performance usually degrades.
> 
> Moving an exit to break even falls into this last category.  It is always an
> attractive sounding exit -- giving you a free trade, and all -- but seldom
> performs as well as expected.  If you plan to use it, test it for yourself.
> 
> By all means --- if you have a trading system where these generalities do
> not hold, do not be bound by them.  I am not suggesting that one solution
> fits all situations, or that these exits will perform in the order I have
> listed for your system.  But do perform your own tests so that you
> understand how your exits work with your systems.
> 
> Thanks for listening,
> Howard
>




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