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Hello Wayne,
These are very helpful suggestions. I made some comments below. I also
included part of my trading system for the position trading that I do.
Part of it entirely and the the other part is proprietary but I gave the
very powerful idea behind it.
Harley
Wayne Moody wrote:
> At 06:51 AM 1/29/98 -0600, Harley Meyer wrote:
>
> (edited)
>
> Harley,
>
> Unless I misunderstand, you seem to be saying that your mechanical
> method gives exact entry but leaves exit subjective, or at least
> in need of improvement.
Let me explain a little more what I do.( It is actually the exit long /
enter short that is great. The enter long / exit short is the problem. )
I position trade using the following indicator on end of day data to
show me momentum (in metastock format). I call it SuperPosition
Stochastic
(Stoch(2,2) + Stoch(3,3) + Stoch(4,4) + Stoch(5,5) + Stoch(6,6) +
Stoch(7,7) + Stoch(10,10))/7
If you take the rate of change of this oscillator, you will see that
when the price is moving up the rate of change is positive and when the
rate of change is negative the price is moving down.
One of the signals for the price to turn down is when the stoch(2,2) is
over bought and is turning down. This is observed during the day in real
time. So I have to make a subjective decision on whether a short term
momentum player is going to hop in under these conditions. Usually not
on the long side.
So this is one part of it.
The other part of my trading system is proprietary. But if you have
Metastock 6.5, I will be more than happy to send it since I can password
protect it. (I had actually sent this out before to a few others but I
think I may of sent out some corrupted files and they may not of
received some of the indicators. I think I have this problem resolved.)
But I will give you the idea behind this indicator. This is an extremely
powerful idea and extremely useful tool for trading. So take note. One
problem we all face with end of day indicators and trading systems is
that we get a buy or sell signal after the market has closed. So I
thought how can I get around this.
So I took my indicator for my buy and sell signal and set it equal to
the close (that is what happens at the end of the day, but with an
inequality) then I solved the equation for the the close and pushed
everything forward one time period. So on one side I have Ct+1 and the
other side I have some formula. The result (the formula on the other
side) is a number generated at time t that would give you your buy or
sell signal, if the tomorrow's last price (close, Ct+1) was less than
or greater than this number.
This takes the analysis to numerical analysis of your charts.
The result of shifting the time period forward 1 day and looking at the
numerical analysis is that you get your signal during the day, instead
of at the end of the day.
My indicator is called the Jarvis Factor (JF) and the basic rule is
this:
Close > JF price is go up
Close < JF price is moving down.
Now here is what I was looking at for Tidewater TDW and in general when
I short.
The rate of change of SuperPosition Stochastic is positive but the
momentum of the rate of change is slowing ( 2nd derivative of
SuperPosition Stochastic) and the stoch(2,2) is over bought and is
turning down. I am anticipating that the rate of change for the next day
will be negative. I anticipate because this gives extra time in the
market and places me higher up on my short. Because once it moves in to
the negative rate of change then I can relax because the system tells me
it isn't coming back up.
Next is JF for the days preceding and a day or to after the turn in
price. Remember JF is generated the night before for the next day.
JF Close Position
1/16 46.02 46.8125 Long
1/20 46.56 49.50 long
1/21 50 48.25 short * Note the
divergence between JF and price
1/22 51.06 45.3125 short ** Note the divergence
between JF and price
1/23 45.229 45 short
So during the day I have to make the subjective decision that the price
under current conditions is not going to go higher based upon the JF
number, as well as other observations. It is easier to look at a run up
to see that there will be a pull back on profit taking. And the JF value
gives me a numerical hurdle to work with. It isn't always so easy for
the entry point to go long.
I will stop this here so the post will not get so long.
Harley
P.S. One note to give you an idea of the win / loss record and
profitability of the rate of change of SuperPosition Stochastic. Run a
system test to check for yourself. Set the delay to zero days and use
the open. Since I physically watch the market in real time during the
day, while I position trade, these setting are valid. If you change
these setting to close or delay 1, the system does poorly. So remember
the context to which this system is being used.
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