ATR based stops

["Rajat K. Bose" <rajatkbose@xxxxxxxxxxx>]

Hello RTs,


If any of you could find time, could you just test the efficacy of this 
Upper and Lower Band based on ATR. The MetaStock formulas are given at the 
end.

Using the default values used in the formulas, I have found that they
provide effective risk control while trading. the upper band can be
used as the extreme point to get rid of shorts and vice versa.

In fact, prices tend to remain above both the bands while the market is in a 
strong uptrend, and prices remain below the bands in a downtrend. During 
short-term range-bound markets, they tend move between the bands.

I have found this idea in Tushar Chande's "New Technical Trader". It would 
be be very nice if any of you could comment on them.

Thanks in advance.

Regards,

Rajat K Bose

MetaStock Formulas:


Upper Band

Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Highest High Value",5,20,10);
(HHV(LLV(L,Prd1)+ATR(Prd1),Prd2))

Lower Band

Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Lowest Low Value",5,20,10);
(LLV(HHV(H,Prd1)-ATR(Prd1),Prd2))

{HHV = Highest High Value;
LLV = Lowest Low Value;
Prd1 is a variable that takes the ATR period as well as Lowest Low value 
period in Upper Band while it takes the Highest High Value for the lower 
band, Prd2 variable is self explanatory.}


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