|
PureBytes Links
Trading Reference Links
|
A few thoughts on this thread: 1) wrt ATR, I use ATR as a positive TARGET,
rather than as a stop level. For example, If I purchased X stock at $40, and
over n bars the stock rises to a price rapidly enough for the price rise to
represent an INCREASE (or a decrease if you're short) in the stock price of y
times the avg. true range, I'm going to be very intent about keeping TIGHT
stops in those situations. Personally, we use 6 times for the ATR multiple
for these targets. Whenever these conditions occur we always tighten our
stops using a combination of steep trendlines and trailing bar lows.
Whenever these are hit, we take a substantial part of the position off
(usually 1/2 but depending on other variables it can be the whole position).
If we leave a position on, we allow a little more retracement in the
remaining units we hold.
2) As far as using ATR as a stop level, I would prefer a chart-based stop
such as a trendline, a pivot point, recent bar lows, a fib percentage
retracement, or even a moving average, BECAUSE these are all LANDMARKS ON THE
CHART. The ATR multiple may or may not coincide to any important Landmarks,
and (unlike fib points or moving averages) is not a point where alot of
traders are focusing.
I should mention that this is part of my approach to STOCK trading. Also, the
rules I use for futures are sufficiently different to not generally follow
the outline above. Further, stocks only hit their 5 or 6X ATR levels
occasionally, and a fair amount of time they just keep on rising right along
the ATR outside extreme for some time.
|