Re: ATR determined stop adjustment

[szzoltan@xxxxxxxxxxxx]

"Don Roos" <roos@xxxxxxxxxxxxxxx> on 03/27 wrote:

Gentlemen:

I am using a high low indicator to determine trend as well as stops.

_____________________________
{My buystop is as follows:}
    buystop = lh + pad
    {where pad is the amount of price movement from the lowest high to
enter
a buy and/ or cover a short.}
_______________________________

I need to adjust it for atr on daily data (data2).

How can I apply this to change the pad in percentage terms relative to the
daily atr over a length of x days without putting the pad out of the
present
price range and maintaining the present relationship?

Any help is appreciated.

Thanks,

Don



ANSWER:

I assume that you use intraday data as data1 so daily ATR may tend to be
higher than "pad" (calculated on intraday data).
Since you would like to change the "pad" in percentage terms relative to
the daily ATR, you have to define following values:

DATR = daily ATR over a length of x days
Ratio =  (DATR / pad)-1
MaxRatio = 2, (user defined value, in this case it does not allow to
adjust/increase pad more then 100 % even if Ratio is higher than 1).
Factor=0.5 (user defined value, in this case you will consider 50 % of the
Ratio. If zero, it will maintain the present relationship of the intraday
data and leave the pad unchanged.)

pad=pad*min(Ratio*Factor+1,MaxRatio)

if you would like to adjust pad to the upside only, use the following:

pad=pad*min(max(Ratio*Factor+1,1),MaxRatio)

In this case pad will be left unchanged if the modified ratio is smaller
than 1.


Zoltan