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Dynamic Breakout System



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<DIV><FONT color=#000000 size=2><FONT size=3>Hello Again</FONT></FONT><FONT 
size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>In trying to calculate the 
&quot;Dynamic&quot; part of the Channel Breakout System described in a previous 
post and reposted below, The following sounds helpful.</FONT></FONT><FONT 
size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>Steps for creating the &quot;Dynamic 
Momentum Index&quot; by Chande and included as a proprietary formula in MSWIN 
6.5 are as follows:</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>1.&nbsp; Calculate the 5-day standard 
deviation of closing prices.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>2. Calculate the 10-day moving average of 
step #1.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>3. Pick the initial period length, for 
example, 14 days.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>4.&nbsp; Calculate the volatility index 
(VI), Volatility Index = today's 5 day standard deviation (step 1) divided by 
today's 10-day moving average of the 5-day standard deviation (step 
2).</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>5.&nbsp; Divide the initial period length 
(from step #3) bythe VI.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>6.&nbsp; Define the upper and lower 
boundaries, for example 30 and 5 days.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3>Any help would be 
appreciated.</FONT></FONT><FONT size=3></FONT></DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT 
size=3></FONT>&nbsp;</DIV>
<DIV><FONT color=#000000><FONT size=3></FONT></FONT><FONT size=3>- 0 
-<BR><BR>&quot;Step #1: After today's close, calculate the 30 day standard 
deviation of<BR>closes including today. Secondly, calculate the 30 day standard 
deviation<BR>from yesterday's close.<BR><BR>today_std = 
standard_deviation(close,30);<BR>yesterday_std = 
standard_deviation(close(1),30);<BR><BR><BR>Step #2:&nbsp; Calculate the 
percentage change from today's 30 day standard<BR>deviation and yesterday's 
standard deviation.<BR><BR>delta = (today_std - 
yesterday_std)/today_std;<BR><BR><BR>Step #3:&nbsp; Dynamically claculate the 
buy/sell channel lengths. Keep track of<BR>the channel lengths, because these 
values will be used to calculate<BR>tomorrow's values. The channel lengths 
initially start out at 20. So to<BR>calculate the channel length for today we 
would:<BR><BR>today_channel = yesterday_channel X (1 + delta);<BR><BR>If you are 
calculating today's length for the first time, then use the<BR>value 20 for 
yesterday_channel. We don't want the today_channel to get too<BR>small or too 
large, so we use the following calculations:<BR><BR>today_channel = 
max(today_channel,20);<BR>today_channel = min(today_channel,60);<BR><BR><BR>Step 
#4:&nbsp; Calculate your buy/sell signals for tomorrow:<BR><BR>buy_stop = 
highest_high(high, today_channel);<BR>sell_stop = 
lowest_low(low,today_channel);<BR><BR><BR>Step #5:&nbsp; If your position is 
flat, place both stop orders on a daily<BR>basis. Cancel whichever order is not 
filled. Once a trade is initiated<BR>place a $1,500 protective stop. Always take 
whichever order is the closest;<BR>the protective stop or the reverse 
stop.&quot;<BR><BR>&nbsp; <BR>I hope that this variable Donchain Channel system 
is programable in MSWIN. The test results from Futures Truth looked very 
good.</FONT></DIV>
<DIV><FONT size=3></FONT>&nbsp;</DIV>
<DIV><FONT size=3>Thanks for your help.</FONT></DIV>
<DIV><FONT size=3></FONT>&nbsp;</DIV>
<DIV><FONT size=3>Walter Lake<BR></FONT></DIV>
<DIV><FONT color=#000000 size=2>&nbsp;</FONT></DIV></BODY></HTML>
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Date: Mon, 10 Aug 1998 14:36:49 -0500
From: Harley Meyer <meyer@xxxxxxxxxxx>
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Al,
After a few moments thought and with a little logic I think have the
answer. First of all we know that when we place an order to short on the
NYSE the pit knows if it is a sell or short. Otherwise there would be no
waiting in the (short) queue for our trade to be executed.
So if Merrill Lynch is the firm supporting the inside market their pit
person would know.

So this solves the NYSE question. The NASDAQ might be no different. Two
experiences. I had placed an order to short on the inside market and the
order was not taken by a buyer. I called Datek and the person explained
two things: one that they didn't have to trade with on instinet and two
that they might want to trade with because they didn't want me to short
the stock. I didn't ask him how they knew I was shorting the stock. But
on my statements when I have turned a trade from long to short or vice
versa the shares on the transaction are generally split and the
transactions occur at different times.

Maybe some one else can shed some light on this as well.

Harley

Al Taglavore wrote:
> 
> On a post of 8/8 in response to an inquiry from Michael, Harley Meyer
> wrote:
> 
> "......The large
> interest who is supporting the market on the
> inside is running low on resources and does not
> want to spend those resources on some one shorting
> the stock as opposed to eliminating someone who
> already holds the stock and is going to sell it......"
> 
> I have been reappraising the values that I place on volume, after observing
> that all volume "is not created equal".  My question is how can those
> supporting the market determines if someone is selling short or holding the
> actual stock?
> 
> Al Taglavore