Hi
A discussion about ATR, stop loss, money management and day trading times. What is posted here is quit timeless. Each statement has its own -.
I post only the most important thought's in my view. What is presented is adaptable to other markets. So read carefully and take out from it what you can.
If you want to get more infos go here : traderclub.com
Here it goes :
- In a down trending market, every UP opening, and early morning rally led to SHORT SALES....
and what are we FINALLY seeing today????
Our TURNAROUND day....
First day in a long time that we had WEAK first hour, and are now seeing afternoon strength.
-----
- it is based on the fact that there is higher degree of TRENDINESS in the last 1 1/2 hours of the day....
Which is why we do not make COUNTERTREND trades against the ticks in the last 1 1/2 hours of the day. last
Funds get notice of new monies coming in, (Or out) after 2:30...
-----
- CHUCK: Average True Range is simply an average of the size of the bars after adjusting for any price gaps. The Range of each bar is simply the High
minus the Low. But sometimes there can be gaps between the bars so that the "true range" could be the difference between the high and the close of the previous bar. Or on down gaps it could be the difference between the low of the current bar and the close of the previous bar.
-----
- CHUCK: keep thing simple, just think of ATR as the size of the bars after adjusting for any gaps. By the way, I usually average 20 bars to create the ATR.
-----
- CHUCK: Now we will talk about how to use ATR. The ATR is a universal tool that can be applied to any market. It allows us to create formulas that
can be applied to any market. For example we could say that risk stops should be set at 2 ATRs from our entry. (Just an example, not a suggestion.)
-----
- CHUCK: This exit would apply to the S&P, the E-mini, Yen futures, shares of IBM or anything else we might want to trade. It can apply to any market
and best of all it adapts to the changes in volatility. If the market gets more volatile the ATRs get bigger. If the market gets quiet the ATRs get
smaller.
-----
- Chuck: Everything I said about using ATR applies to bars of any time frame. That's what is so great about ATR. You can use the Chandelier Exit or
the Yo Yo on five-minute bars. No problem.
-----
- Chuck: Re wide stops on S&Ps. It all has to be relative to the volatility. If the stops are set in units of ATR that adjust to the volatility they
shouldn't be hit any more frequently than any other method. Probably less.
Chuck: I don't day trade S&Ps but risking about two or three ATRs should work on any market and any time frame.
-----
- CHUCK: The first exit I set is a simple one to protect from some catastrophic loss. This is sometimes called a money management exit. It is a wide
stop that is intended to protect you from a major disaster.
CHUCK: This stop is rarely if ever hit. Good thing. but it needs t be there just in case.
CHUCK: The next stop is a fairly wide trailing stop that is usually closer than the MM stop. You can use the lowest low of X bars or some moving
average. If the trade is moving in the right direction this stop will gradually trail up and reduce the risk on the trade.
CHUCK: After some period of time or after some amount of profit I like to start thinking about maximizing the profit on the trade instead of focusing
on reducing the loss.
CHUCK: I can measure the time in the trade (use some number like after ten bars)and then start tightening the stop whether the trade is profitable
or not. This will keep you from wasting time and capital in markets that aren't moving.
CHUCK: Once the trade reaches some profit threshold then the stops can also be moved up. I like to measure those profit thresholds in units of ATR.
CHUCK: The bigger the open profit the tighter I like to have my stops. I think it is a big mistake to give back big open profits. I hate that.
CHUCK: Keep in mind the idea of starting trades with wide stops and then making them tighter later on. This procedure allows you to have a high
percentage of winning trades and it also allows you to maximize the size of the winners. I think that too many traders try to trade with very tight
stops. that can be a mistake.
Chuck: Trailing stops tend to move up automatically but you can change the way they are calculated at various intervals.
Chuck: For example you can use a 30 bar moving average and then shorten it to a twenty day MA and then a ten day MA, etc.
Chuck: It seems to me that adjusting the way the stops are calculated after time intervals and profit intervals is the key to success. The stop
that you start with is not the stop you end with.
------
- If you get a large instant move in your favor do you just lock in the profit or do you continue with the stops and stick with the program?
The windfall trade!
Depends on the time frame I am trying to trade. If I were day trading I would take the windfall. If I were trading longer term I would
raise the stop to a tight level and try to hold on.
------
Take care and enjoy your weekend
DanPickUp
A discussion about ATR, stop loss, money management and day trading times. What is posted here is quit timeless. Each statement has its own -.
I post only the most important thought's in my view. What is presented is adaptable to other markets. So read carefully and take out from it what you can.
If you want to get more infos go here : traderclub.com
Here it goes :
- In a down trending market, every UP opening, and early morning rally led to SHORT SALES....
and what are we FINALLY seeing today????
Our TURNAROUND day....
First day in a long time that we had WEAK first hour, and are now seeing afternoon strength.
-----
- it is based on the fact that there is higher degree of TRENDINESS in the last 1 1/2 hours of the day....
Which is why we do not make COUNTERTREND trades against the ticks in the last 1 1/2 hours of the day. last
Funds get notice of new monies coming in, (Or out) after 2:30...
-----
- CHUCK: Average True Range is simply an average of the size of the bars after adjusting for any price gaps. The Range of each bar is simply the High
minus the Low. But sometimes there can be gaps between the bars so that the "true range" could be the difference between the high and the close of the previous bar. Or on down gaps it could be the difference between the low of the current bar and the close of the previous bar.
-----
- CHUCK: keep thing simple, just think of ATR as the size of the bars after adjusting for any gaps. By the way, I usually average 20 bars to create the ATR.
-----
- CHUCK: Now we will talk about how to use ATR. The ATR is a universal tool that can be applied to any market. It allows us to create formulas that
can be applied to any market. For example we could say that risk stops should be set at 2 ATRs from our entry. (Just an example, not a suggestion.)
-----
- CHUCK: This exit would apply to the S&P, the E-mini, Yen futures, shares of IBM or anything else we might want to trade. It can apply to any market
and best of all it adapts to the changes in volatility. If the market gets more volatile the ATRs get bigger. If the market gets quiet the ATRs get
smaller.
-----
- Chuck: Everything I said about using ATR applies to bars of any time frame. That's what is so great about ATR. You can use the Chandelier Exit or
the Yo Yo on five-minute bars. No problem.
-----
- Chuck: Re wide stops on S&Ps. It all has to be relative to the volatility. If the stops are set in units of ATR that adjust to the volatility they
shouldn't be hit any more frequently than any other method. Probably less.
Chuck: I don't day trade S&Ps but risking about two or three ATRs should work on any market and any time frame.
-----
- CHUCK: The first exit I set is a simple one to protect from some catastrophic loss. This is sometimes called a money management exit. It is a wide
stop that is intended to protect you from a major disaster.
CHUCK: This stop is rarely if ever hit. Good thing. but it needs t be there just in case.
CHUCK: The next stop is a fairly wide trailing stop that is usually closer than the MM stop. You can use the lowest low of X bars or some moving
average. If the trade is moving in the right direction this stop will gradually trail up and reduce the risk on the trade.
CHUCK: After some period of time or after some amount of profit I like to start thinking about maximizing the profit on the trade instead of focusing
on reducing the loss.
CHUCK: I can measure the time in the trade (use some number like after ten bars)and then start tightening the stop whether the trade is profitable
or not. This will keep you from wasting time and capital in markets that aren't moving.
CHUCK: Once the trade reaches some profit threshold then the stops can also be moved up. I like to measure those profit thresholds in units of ATR.
CHUCK: The bigger the open profit the tighter I like to have my stops. I think it is a big mistake to give back big open profits. I hate that.
CHUCK: Keep in mind the idea of starting trades with wide stops and then making them tighter later on. This procedure allows you to have a high
percentage of winning trades and it also allows you to maximize the size of the winners. I think that too many traders try to trade with very tight
stops. that can be a mistake.
Chuck: Trailing stops tend to move up automatically but you can change the way they are calculated at various intervals.
Chuck: For example you can use a 30 bar moving average and then shorten it to a twenty day MA and then a ten day MA, etc.
Chuck: It seems to me that adjusting the way the stops are calculated after time intervals and profit intervals is the key to success. The stop
that you start with is not the stop you end with.
------
- If you get a large instant move in your favor do you just lock in the profit or do you continue with the stops and stick with the program?
The windfall trade!
Depends on the time frame I am trying to trade. If I were day trading I would take the windfall. If I were trading longer term I would
raise the stop to a tight level and try to hold on.
------
Take care and enjoy your weekend
DanPickUp
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