Traders' Roundtable

Referring to page 19 on System 1 Entry, during the range market, price often exceeded by a single tick the high of the preceding 20 days which would buy one unit to initiate a long position, and reverse direction and hit stop loss.

Q1: where to set stop loss for this long position?
Q2: if price reverse direction and hit stop loss, how to handle this situation?

Does anyone have any suggestions?
Thanks in advance for any suggestions

Stop is placed at the desired ATR (N) from the entry price. Typically 2 ATR.
If the stop is hit, the position is closed.

During the range market, price often exceeded by a single tick the high of the preceding 20 days and then reverse direction, which generate a lot of false entry signals.

Do you have any suggestions on how to avoid this false signal?
Thank you very much for any suggestions (^v^)

"To avoid whipsaw losses, stop trading" - Ed Seykota

If I know that market is range market, then I can avoid whipsaw losses, but noone can tell on whether market is range or trend, and I want to ensure having position on trend market.

I can accept a few whipsaw losses on risk management, but the risk is too high with 2 ATR as stop loss within range market.

Do you have any suggestions on any turtle rule handling this situation?
Thank you very much for any suggestions (^v^)

Use the Macd filter like the trading blox Donchian system does.

For MACD as a filter, could you please provide a link for related reference materials?
Do you have any suggestions?
Thanks, to everyone very much for any suggestions (^v^)

The MACD filter is a Portfolio Blox that is in the Trading Blox is installation program. It is useful because it only allows orders that are going in the direction that the MACD index is moving.

To add it to your system, select the system you are using and then locate the MACD Portfolio Manager blox. Then click on the MACD and add it to your system.

Depending upon the types of instruments and the trend period durations, you might consider testing a broad portfolio with variations in the period calculation length used to create the MACD index.

Selecting instruments that are trending in the direction you create a position will by its nature of price agreement, reduce the number of false signals.

Good Luck,
Roger...

During the range market, when price exceeded by a single tick the high of the preceding 20 days and need to be confirmed with MACD direction, in order to avoid many false entry signals, would this approach be the purpose for using MACD filter?

Do you have any suggestions?
Thanks, to everyone very much for any suggestions (^v^)

<< in order to avoid many false entry signals, would this approach be the purpose for using MACD filter? >>
No. The MACD is a trend direction indicator. It is used to prevent the system from generating an order that is going against the current trend in prices.

When prices are moving in a channel that has no significant slope, the market isn't ripe for a break-out type of entry. Prices are creating a channel are more suited for systems that take advantage of the channel's tendency to move-up, and then later-move down. In a sideways price range, the opportunity is to buy at the bottom of the channel and sell at the top of the channel. The Buy/Sell description above is called "Swing-Trading."

Linda Bradford Raschke and Laurence A. Connors wrote a book as joint authors called" "Street Smarts: High Probability Short-Term Trading Strategies." I only trade trending markets, but some of the people I've spoken with report the book describes various short-term techniques that probably talks about "Swing-Trading."

In reality, Swing Trading probably needs a live data stream to be effective, and some indicators to display the characteristics associated with price channels.

Keep in mind that markets only trend about 20 to 30 percent of the time. When the trend ends, it will reverse, or go sideways. MACD index display can be a good, but not perfect, indicator to prevent Long or Short positions when the market isn't going to move Up or Down.

Give yourself some time to learn which markets trend better than others, and focus trend systems on those markets.

If you are finding the breakouts putting you into a position, that turns around, you are in a swing-trade area. Consider expanding the range of the Donchian channel. If the price bounce back is causing your trouble, consider buying within the breakout channel, with a wider protective price. Whatever you do, try to stay out of markets when the prices are swinging.

Good Luck,
Roger...