How do you roll your SL point

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AceofAce
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How do you roll your SL point

Post by AceofAce » Tue Jun 21, 2011 10:27 am

When trading a version of the turtles system (at 80/40), anyone has any ideas how to adjust the SL point when rolling to a new contract month.

Supposedly we roll the E-Mini from June to Sep by closing at say 1150 and reopening at 1170, do we just move the SL point up by 20 points. If the old SL point was at the 40 day low of the June contract, say at 1000, it doesnt mean that the 40 day low of the new contract will be at 1020. It appears there are three options:

1. Set the new SL, 20 points higher than before, i.e. maintain same risk, irrespective of the new 40 day low.
2. Set the new SL to the new 40 day low, if that is more than 20 points higher, we are reducing the risk but increasing the chance of being stopped out
3. Set the new SL to the new 40 day low, if that is less than 20 points higher, we are increasing the risk but reducing the chance of being stopped out.

sluggo
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Post by sluggo » Tue Jun 21, 2011 11:43 am

If you wanted to, you could calculate all three stoploss prices from your list items 1, 2, and 3. You could call these stoploss prices SP1, SP2, and SP3.

You might decide to
  • Place a stoploss order at price SP1 for (1/3rd) of the position, place another order at price SP2 for (1/3rd) of the position, and place yet another order at price SP3 for the final (1/3rd) of the position
  • Calculate the average A = (SP1 + SP2 + SP3) / 3 and place a stoploss order for the entire position at price = A
  • Choose whichever of the three stoploss prices is "tightest". For longs, choose MAX(SP1, SP2, SP3) and for shorts choose MIN(SP1, SP2, SP3). Place a stoploss order for the entire position at this "tightest" stop price.
  • Choose whichever of the three stoploss prices is "loosest".
  • etc.
Whichever method you select, you probably want to implement that method in your backtesting, to be certain you test what you trade and trade what you test.

AceofAce
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Post by AceofAce » Tue Jun 21, 2011 1:27 pm

Many thanks for your feedback sluggo.

Point 2 and 3 are mutually exclusive so i guess is a choice of 1 and 2 or 1 and 3 or combinations as you suggest.

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