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I don't use many systems because most of them generate too many signals
and really don't fit in with my thinking about trading, but I have
found this trend-following system is an excellent one.
I use this system in my personal trading, and find it is pretty good,
but I have restricted its use and changed a couple of things.
1) it works best, BY FAR, on index and sectors
2) it works okay for futures
3) I wouldn't use it for stocks at all.
I enter at the same entry point that the system calls for.
But I only exit when the index or futures CLOSE THROUGH the exit point
(in other words, I don't get out if it only hits the exit point
intraday).
Also, if the chart bounces off the exponential moving average a couple
of days in a row, I will use the MOST RECENT bar as the dictator of the
entry point. This has been a useful improvement in a lot of cases. In
fact, I'm not sure it's not how the system was intended to be used --
it's just not spelled out in the book.
For index options, since I've been tracking it, this system has had 43
winners in 71 traders for a total of +515 index points. The most
recent one was a sell signal on the XOI (Oil and Gas Index) at 445 just
before it broke down to 408.
Since you can't by the index itself, you should buy an at- or slightly
in-the-money option in order to trade this system.
Lawrence G. McMillan
mac19@xxxxxxxxxxxxx
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