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Ian,
An interesting comparison.
1. It is always a dilemma to decide between selling too soon so that
you give up a larger profit, or waiting and having to exit at a lower
price. There is no single solution. The stoplosses you illustrate make
the decision for you.
2. Don't judge by just one example. How does any technique work over
numerous cases - they are all different. You could run a series of
tests using each stoploss in turn.
3. You knew where all the stops were, and they were not that far
apart. Had you had a sell order already in place you would have
protected more of your profit.
4. If you are going to wait until a close below the exit level and sell
at the next open, your trendline would have taken you out at just the
same place.
In sum I'd say that, in this particular case at least, the main problem
was failing to exit immediately after the stoploss was triggered.
HHP
====================
Ian Burgoyne wrote:
>
> I've been trying to improve my position trading by using a volatility
> indicator to exit long positions primarily to protect profits. I like the
> concept of a volatility stop as it is directly linked to the ranging
> activity of the security. A number of them have been discussed on this forum
> such as the Volatility Stop (Long) by Chande & Kroll, Trading The Trend by
> Andrew Abrahams, ATR Trailing Stop by Yngvi Hardarson and the Count Back
> Line by Daryl Guppy.
> I've attached a chart of a trade I exited today.
> Acting on the exit signal given by all the indicators yesterday I exited too
> late and gave up about 72% of available profit which is way too high a price
> for my liking. By using a lower multiplier of the ATR I would get a tighter
> stop but often it can take you out of a trade prematurely. Had I based my
> exit on the trendline I would have exited yesterday.
> I know it's difficult to counter a gap move down like this one but can
> anyone suggest a better method which will keep a good portion of profits yet
> not exit trades too early.
> regards
> Ian Burgoyne
>
> ______________________________________________________
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>
> ------------------------------------------------------------------------
> Name: Volatility Stop.gif
> Volatility Stop.gif Type: GIF Image (image/gif)
> Encoding: base64
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