RE: Capturing more of MFE (was: efficient exits)

["Dennis Todd" <dennistodd@xxxxxxxxxxx>]

This is great information Mark!

I would also recommend visiting Chuck LeBeau discussion on similar analysis
called "ATR Rachet". He gives an in depth discussion on a similar technique
for exiting a trade by "racheting" the exit point close to top/bottom of
your trade.

You can find it by going to: http://www.traderclub.com/discus/board.html
Click on "Traders Club Bullentin", then
Click on "Bullentin 47 ATR Rachet".

Thank you Mark for your contribution!

Dennis

-----Original Message-----
From: Mark Johnson [mailto:janitor@xxxxxxxxxxxx] 
Sent: Tuesday, October 05, 2004 5:39 PM
To: omega-list@xxxxxxxxxx
Subject: Capturing more of MFE (was: efficient exits)

One generic approach that seems to work well
is the following.

1.  Add two new parameters to your system,
     "Thresh" and "tighter".

2.  Add a rule that when a trade moves in
     you favor by "Thresh" amount, you'll
     move your stop tighter (protecting more
     of your profits) by an amount "tighter".


You can make "Thresh" be (some number of ATR's),
or some constant times (the Linear Regression Slope),
or some constant times (the 20 day range (HH20 - LL20)),
or some number of standard deviations of price,
or some fraction of the move from the Pivot Low to your entry,
or some number of days on which the trade was net profitable,
or some multiple times your initial stop,
or some fraction of the average MFE for your system,
or any other darned profit target you can dream of.


You can make "tighter" be (reduced #days in a moving avg exit)
or reducing the chandelier height in the chandelier stop,
or reducing the #days in a CBO exit stop,
or adding a new exit, very tight CBO, after you hit the Thresh,
or reducing the get-me-out threshold of the Yo-Yo exit,
or boosting the acceleration parameter in the Parabolic stop,
or modifying the indicators that get you out (Stochastic, RSI, DMI)
     such that they'll get you out quicker,
or any other darned method of becoming quicker to exit

I realize that it's controversial to add parameters
to a system.  But if you try it I think you may be
pleased with the results.

  -- Mark Johnson