95 percent of profits come from only 5 percent of the trades - Richard Dennis.
Once your onto a winner, its important to ride the trend for as long and as hard as you can. This holds true for all methods but even more so for those that lose more often than they win.
Ideally, you don't want to get out at small pullbacks, but rather when there is a change of trend. Of course, with testing we try and go for what works over a statistically significant number of trades over a long time. Then we know what parameters we use to trade. There will be exceptions that hit your stop then go to the moon but you just have to let these go. They'll probably trigger another entry anyway.
ATR exits I have found work very well on weekly charts, the multiplier I am using in my testing and in the above chart is 2*ATR(10). See how quickly it follows the price action and only moves in one direction -- North. The exit trigger is when the CLOSE is at or below the ATR trailing exit. Here the common exit for all pyramided positions was taken at $45.00, the bar after the exit was triggered.
I've got a new book. Leon Wilson's breakthrough trading. I've only read the first few chapters but I like it how the code is in MS/TradeSim language. I think the first chapter is a very good introduction to systems development.
3 comments:
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Hello Nizar,
I'm glad to discover your blog, with a great pedagogical work on trading systems. I't a good complement to what I'm trying to do on "bourseweekend.fr", wich intends to test "live" my own weekly trading system, developed with MS and TradeSim.
I've been giving weekly signals (with entry levels for the week after) for 6 months now, and run a fictitious portfolio on an independant website wich is called "BourseMatch".
As I use an index filter (french CAC40), I'm out of the market since 30th of Jully, but will probably be back on next week, depends on Friday's close.
Do you plan to trade a public portfolio with your system ?
J2L
Hi J2L,
Thanks for dropping by.
I will begin live trading soon and trades will be posted on this blog.
I had a look at your site but its not in english!
Index filter is an interesting idea. I have not yet implemented one into my system because the way it stands, the system doesnt seem to perform too poorly during market downturns.
Index filters I heard dont improve profits as such but rather aim to decrease drawdowns. But it would be interesting to test and see what happens.
I use MS and tradesim as well. Maybe you can help me code an entry filter. Maybe something simple like if last weeks close on the index is lower than the previous weeks close, then the system turns off. I'm not sure how I can tell MS to refer to the Index. I plan to trade only ASX stocks at this stage.
How has your performance been for the last 6 months?
Nizar.
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