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My immediate thought is that an ATR trailing stop is to some extent already
self-adapting to the strength of trend, so long as the ATR bars are fairly
short - that is, the ATR is likely to increase when the security moves from
congestion to trend. Whether this is enough is something you can only work
out by back-testing.
The ADX is fairly slow-moving, so may not be that helpful.
You could also experiment with the parabolic SAR, which starts off as a wide
stop and then diminishes.
Andrew
-----Original Message-----
From: draggiedriver [mailto:maluabay@xxxxxxxxxx]
Sent: Friday, February 04, 2005 11:51 PM
To: Metastockusers@xxxxxxxxxxxxxxx
Subject: [Metastockusers] Re: Trending Markets
Hello everyone,
I wondered if I could ask for some philosophy/advice/help about the
application of volatility stops in trending markets.
I have used Richard Dale's trailing stop a great deal (thanks - I
love it!) but it makes use of a contant ATR multiplier. Similarly, I
have made use of a profit stop at HHV+2*ATR.
It's my feeling that these multipliers could be usefully varied with
market trendiness. In this regard, I also feel that, on the basis of
preceding discussion, Trend Intensity may be a little too 'digital'
for what I want to do, and that ADX might do the trick.
I am very much a newb, and an entry-level programmer; but I bring my
attempt at a variable profit stop to the forum and see what opinions
it garners:
Adaptive Profit: HHV(HHV(H,10)-(3.5-(ADX(10)-25)*1.5/35)*ATR(10),10)
I realise there will also be a trailing version of this as well.
My first attempt: please be gentle!
D
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