Re: Stocks To Keep A Close Eye On - Chapter II
Hi Suresh,
Tgt = 2 * H - SL;
is an empirical formula to calculate the target price. It has no theory behind it but it has Savant's experience behind it. I would roughly understand it like this:
When the Buy trigger is given, the price has already moved up from the previuos low. I assume that it has alrady moved by 50% towards the target. The total move from its low to the High of trigger day is therefore (H - SL) where H is high of trigger day and SL is the previous low (which we take as stop loss). As this (H - SL) is 50% of actual target, it will move by the same amount (50 + 50) above the High to reach the target. Therefore, our target price is Tgt = H + (H - SL) = H + H - SL = 2 * H - SL;
As you see, it is only an empirical formula. But it works most of the time. It does fail some times, without achieving the target. But it is part of a system which we can not predict. Till we find a better and more accurate way of calculating Target, use it with its limitations.
As for the history of Sep-Oct period, you can see the charts with the AFL and find that in those periods the system has performed well. In the uptrend of 2007, the system has given BUY triggers near the beginning of the uptrend and continued till the end of the trend without any Sell trigger in between. Of course, a few whipsaws in some cases are there but overall its performance was good. Similarly, in 2008 (the downtrend period), the system has given Sell triggers just after the beginning and No Sell triggers till the end of that period. Again, a few exceptions are there. Therefore, the overall performance is good. The system has been back-tested with historical data and also with live data since July till date.
-Anant
Hi Suresh,
Tgt = 2 * H - SL;
is an empirical formula to calculate the target price. It has no theory behind it but it has Savant's experience behind it. I would roughly understand it like this:
When the Buy trigger is given, the price has already moved up from the previuos low. I assume that it has alrady moved by 50% towards the target. The total move from its low to the High of trigger day is therefore (H - SL) where H is high of trigger day and SL is the previous low (which we take as stop loss). As this (H - SL) is 50% of actual target, it will move by the same amount (50 + 50) above the High to reach the target. Therefore, our target price is Tgt = H + (H - SL) = H + H - SL = 2 * H - SL;
As you see, it is only an empirical formula. But it works most of the time. It does fail some times, without achieving the target. But it is part of a system which we can not predict. Till we find a better and more accurate way of calculating Target, use it with its limitations.
As for the history of Sep-Oct period, you can see the charts with the AFL and find that in those periods the system has performed well. In the uptrend of 2007, the system has given BUY triggers near the beginning of the uptrend and continued till the end of the trend without any Sell trigger in between. Of course, a few whipsaws in some cases are there but overall its performance was good. Similarly, in 2008 (the downtrend period), the system has given Sell triggers just after the beginning and No Sell triggers till the end of that period. Again, a few exceptions are there. Therefore, the overall performance is good. The system has been back-tested with historical data and also with live data since July till date.
-Anant
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