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As a day trader I arrived at the same conclusion as Chuck. After trading a
simple breakout system for several years with a fixed profit target, it
occurred to me that it would be sensible to have a target which varied with
market volatility, and I use a 20day ema of average true range. However,
instead of multiples of atr which are obviously valid for position trading,
I use a percentage (55%) for intraday trading.
Interestingly, I find that this exit strategy reduces the overall return
compared with holding to the close or out at breakeven, but gives a
smoother equity curve. And as I have learned the hard way, I am allergic to
large drawdowns.
Hugh.
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> From: Clint Chastain
> Subject: Re: System Exits
> Date: 27 September 1998 05:11
>
> Measuring Profit Targets in terms of multiples of Average True Range.
Hmmm.
> Interesting - and totally new to me.
>
> In my initial experimentation with this idea I find that it does seem to
> salvage some otherwise marginal trading strategies. Where did this idea
> come from?
>
> Clint
> -------------
>and from Chuck on same date:
>From trial and error and years of searching for better exits that are
logical.
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