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In a message dated 7/26/98 9:45:58 PM, jerrywhi@xxxxxxxxxxx wrote:
<<Sure, you are finding the distribution of
>the last 15 or 30 days or whatever but the next ten days may be a
>different "population". Certainly basing stops on current volatility
>makes sense. But is calculating the stops to be a distance of avgrng +
>n*sigma away, any better than just using n*avgrng?
The best results seem to be using longer time frames (100 days+) so that
you have a good working sample. A statiscition could probably come up
with an "optimal" value for the number of days.
> Conrad Bowrers>>
I have traded using volatility stops for years. We started out using a short
period for the average (4 days) because we wanted the stops to expand quickly
if the market became volatile suddenly. This worked just fine for several
years and then we started getting whipsawed. Turns out that the markets
started getting very quiet for a few days at a time and our stops moved too
close. Once we understood the problem, the solution was fairly obvious. We
decided to use two time periods and default to the widest stop. That way the
stops could expand quickly and not move in too close. This solution worked
much better than trying to optimize one time period for the average.
Chuck
traderclub.com
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