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Al,
If you find time, could you just test the efficacy of this Upper and
Lower Band based on ATR. The MetaStock formulas are given at the end.
Using the default values used in the formulas, I have found that they
provide effective risk control while trading. the upper band can be
used as the extreme point to get rid of shorts and vice versa.
In fact, prices tend to remain above both the bands while the market is
in a strong uptrend, and prices remain below the bands in a downtrend.
During short-term range-bound markets, they tend move between the
bands.
I have found this idea in Tushar Chande's "New Technical Trader". Since
you have studied ATR so thoroughly, it would be be very nice if you
could comment on them.
Thanks in advance.
Regards,
Rajat K Bose
MetaStock Formulas:
Upper Band
Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Highest High Value",5,20,10);
(HHV(LLV(L,Prd1)+ATR(Prd1),Prd2))
Lower Band
Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Lowest Low Value",5,20,10);
(LLV(HHV(H,Prd1)-ATR(Prd1),Prd2))
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