RE: GEN: Parabolic

[Peter Ryan <pryan@xxxxxxxxxxxxxx>]

Conrad,
Very interesting thoughts - thanks.

I am using Parabolic with intra-day breakout systems using 3-minute bars of 
index futures.
I am not too concerned with the gap at the beginning of the trade.  I use a 
fairly tight stop-loss initially, then let the parabolic stop kick-in once 
it has advanced past my entry price.

What I liked about it was its seeming ability to get out near the top of a 
move.   I havent found any other indicator which gets me out at a top so 
nicely.

Thanks again for your ideas on fiddling with the parameters.
Peter Ryan


-----Original Message-----
From:	cb [SMTP:cpbow@xxxxxxxxxxxxx]
Sent:	Sunday, October 18, 1998 9:10 PM
To:	pryan@xxxxxxxxxxxxxx
Cc:	RealTraders Discussion Group
Subject:	Re: GEN: Parabolic

Peter Ryan wrote:
>
> I have started using Parabolic as a trailing stop in a couple of my 
systems.
> I dont see it mentioned very often in books or on lists like this.
>
> Is there some reason it is not popular.
>
> Thanks
> Peter Ryan

Maybe because it was originally presented as a stop-and-reverse system.
Without some kind of filtering I don't think it tests well as a stand
alone system except in the trendiest of mkts.  Lebau and Lucas do
suggest using it with ADX as a filter.

I think it's a pretty good choice for a stop (exit only), particularly
if you experiment with the parameters.  If your software allows it, try
changing both the "initial %", (the % of (H-par[1]) that it moves up on
the second day of a long), as well as the acc. increment (the amt the %
increases  with each new high).  You can make it less parabolic and more
like a curvy trendline, displaced a little ways from the data, if you
use higher initial% and a lower increment.  I didn't like the very slow
initial response of the parabolic with default parameters of 2%, 2%.
Using 5-10%, and about 0.5% seemed to make a better stop that follows
the trend well, gets fooled into a premature stop rarely, and, on medium
to longterm trends, doesn't give up too much of the gains before exiting
on true reversals.  What it doesn't do well on, even with modified
parameters, are short term profits at the beginning of the trade - if
that's all that develops you will likely give them back.  Of course this
is true of any stop that gives the trade room to "breath".  I suspect
the big gap between the mkt and the parabolic at the beginning,
particularly with the default parameters, is another reason it is not
popular.

[I haven't succeeded at this trading thing yet, so take all comments for
what they're worth.]