EXIT signals ...

How do you know when a trend has started? Ended? This forum is for discussions about trend indicators and signals.
Kiwi
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Post by Kiwi » Thu Dec 25, 2003 8:34 pm

Post Xmas Fun. Merry Xmas everyone ... or whatever celebration you were involved in at this time of the year.

I see c.f. objected to 3. I would like to have a go at 2 and 5 for some fun.

2. indicators don't have predicting value

To me this contradicts 4. For example a moving average is a trend following signal. But because of 4 (or perhaps the crowd) when price has risen and then falls back to the moving average the correct moving average is an excellent predictor of a reversal. The correct combination of entry and stop gives a much better result than random entry. So the MA has predictive value. My issue with 5 illustrates another case when indicators are predictive.


5. to be succesfull you have to act (very) against human nature / habits
Almost a justification of peoples (frequently faulty) natural call to the countertrend. If you can find a way to enter early in the wave of human nature you will get a higher return than if you do not. So I like to enter in such a way that there is a good chance that price development will result in buy signals for other humans following their nature. If I buy with a cci there is a good chance that a bar later stoch followers will get a signal. A bar after that the macd followers get theirs and somewhere in there (or maybe a bar later) it breaks out and the breakout buyers get their signal. Human nature happiness :-)

Of course my buy occured because someone else limited in at a fib ratio or a moving average or at resistance or because it just felt good to them.

My views :wink:

John

Erwin Dicker
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Post by Erwin Dicker » Sat Dec 27, 2003 4:55 am

Kiwi wrote:Post Xmas Fun. Merry Xmas everyone ... or whatever celebration you were involved in at this time of the year.

I see c.f. objected to 3. I would like to have a go at 2 and 5 for some fun.

2. indicators don't have predicting value

To me this contradicts 4. For example a moving average is a trend following signal. But because of 4 (or perhaps the crowd) when price has risen and then falls back to the moving average the correct moving average is an excellent predictor of a reversal. The correct combination of entry and stop gives a much better result than random entry. So the MA has predictive value. My issue with 5 illustrates another case when indicators are predictive.


5. to be succesfull you have to act (very) against human nature / habits
Almost a justification of peoples (frequently faulty) natural call to the countertrend. If you can find a way to enter early in the wave of human nature you will get a higher return than if you do not. So I like to enter in such a way that there is a good chance that price development will result in buy signals for other humans following their nature. If I buy with a cci there is a good chance that a bar later stoch followers will get a signal. A bar after that the macd followers get theirs and somewhere in there (or maybe a bar later) it breaks out and the breakout buyers get their signal. Human nature happiness :-)

Of course my buy occured because someone else limited in at a fib ratio or a moving average or at resistance or because it just felt good to them.

My views :wink:

John
:idea: Don't forget the different time frames of the different trades. A trader with shorter timeframes gets the signals earlier.....in all indicators.

:idea: do you agree that trading is a zero sum game?

Nice days!

Erwin

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Post by Erwin Dicker » Sun Dec 28, 2003 5:33 am

kianti wrote:I would give more weight in my central defuzzoider to money management and psicology.

In money management I think there is room for a certain grade of control and optimization; think about risk of ruin or max drawdown.

But it all comes back to psicology, do you wanna become the next Soros or Ninja Turtle overnight? how you gonna cope with drawdowns? you cannot have 80% of winnings ( as we say in kianti, the wife drunk and the bottle full) if you are trend follower; a friend of mine started trading a trend-following system and because he had a few losing trades in the Live Cattle early this year, he 'took profit' and let go one of the best trends of thise year. You call it 'noise' only after. Entry is important, because you're looking for a long option profile for your trades, you're hunting black swans not white. Identifying low risk/high reward points is essential, the noise is the price you pay to be early on the bandwagon.

Merry Christmas and Happy New Year
Oh yes...

Why are you talking about: becoming Soros overnight? It feels like a sort of insult or dominant expression. As i understood they are not welcome on this forum. Agree?

To defend myself:
I have some experience (7 years) and the last 3 years i have traded small and large accounts with equal pleasure and results... The large accounts i traded up to 700 future contracts and the smaller up to 5 or 6 (short term). I never blew up an account. I have theoretical background from my study in physics and mathematics. The only thing i was trying to do is getting down to basics in trading in a perhaps not so conventional way.

Let's pick up the right tone.

Erwin

Kiwi
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Post by Kiwi » Sun Dec 28, 2003 5:47 am

You're being overly sensitive Erwin. You seem to have confused humour with insult.

Some of your posts read a little funny to me but I assumed that it was the translation rather than the intent. I think you owe Kianti the same assumption.

Its interesting that your posts don't read as if they were from someone with the experience of making the decisions that you describe in your last posting but again ... issues of communication and your intent to get down to basics.

Happy New Year.
John

PS. I perceive trading as a negative sum game for retail traders.

Erwin Dicker
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Post by Erwin Dicker » Sun Dec 28, 2003 7:07 am

Thanks for your reaction. Of course..... one misses the intonation.... :lol:
And....i'm not oversensitive 8). You cannot be a trader then, without emotional control :|

My goal is to come to the (emotional - psychological) fundamentals of trading with as less math as possible. That is why i put my hypotheses on this forum.

Up to now i can conclude that (perhaps) a little math is needed to calculate "noise" in price movement. It is nothing new to calculate noise, anyway. If we know the value of "noise", we also know when a price movement is not "noise"....so a signal.

Questions:

1. how to define signals in a trend?
2. why stop adding positions during a trend?


Erwin

kianti
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Erwin

Post by kianti » Sun Dec 28, 2003 6:07 pm

Dear Erwin,

I apologize to anyone feeling insulted by me in this forum. :oops:
maybe the influence of 'Trading Places' on TV.

I just had the feeling that sometimes a little bit of humor could help; no intention to undervalue your experience; in my modest and humble past trading experience humor helped a lot, expecially in a trading pit with a few hundred people around you :D

There's a high chance as well that a touch of humor could help in life in general.

It would be very interesting to share experience from other traders:
How humor influenced your trading ?

best regards, as ever

P.S.
:idea: Bill & Rich like the Duke&Duke :?: :!: :?:

Erwin Dicker
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Duke & Duke ....

Post by Erwin Dicker » Mon Dec 29, 2003 2:33 am

Humor is very important in trading. It helps you to accept your losers.

Laugh when you lose....... :lol:

And i think that if one wants to feel bad he will get that feeling.

Funny film by the way :lol:

Erwin

ES
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atrs

Post by ES » Tue Dec 30, 2003 1:43 pm

use atr's for stops thst it start there. you can have the greatest signals for ewntry but thats totally irrelevant. it doesn't matter how you get in
its how you get out. i always thought when i traded very very manually, that oh the entry is the big shot etc but i now realize that it doensnt even matter. i could go long xyz at the worst and most ridiculous time, but the exit only enables you to keep score.

i would firstly say that consistency is very important. you may test different exits but you're going to sooner or later want to implement a consistent parameter.

I don't understand why so many technical traders and quants are so infatuated with such minute and minimal issues, they drive themselves crazy trying to make an extra .00005 percent. this on;ly matter if trading with a billion dollars.

review c.f.' turtle rules. the exits are defined by atr's.
and remmeber the trends today are not the same as the trends of yesteday or tomoro. this is why we eliminate the prediction function
best
eric

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Volatility Stops

Post by Neil » Wed Jan 21, 2004 6:08 pm

Babyturtle

at last someone has mentioned ATR stops. If a 2ATR stop is good enough for the enty stop then why not use a larger multiple of ATR as a trailing stop. Say 3 or 3.5?

when I compare this to to the price low of n days ago as a stop (as in the turtle system), I find that the ATR stop is superior in that it moves in the direction of the trend sooner and stays out of the noise. A volatilty based stop may get you out at the same point as the turtle exit, but the advantage is that it lets you show a stopped in profit sooner. You can then "play with the market's money" earlier on if you want to pyramid the position.

An example. You enter long and within a couple of days the market moves 5 ATR in your favour. Using the turtle 20 day exit you cannot move the stop up for 20 days by definition. A 3ATR trailing stop would be showing you a stopped in profit right away. you could then risk a little of this profit and add to the position.

Does anyone have any experience of ATR stops? Are there any disadvantages that I have missed?

Neil

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Post by rabidric » Tue Jan 10, 2006 4:25 am

Neil,

I believe you have perhaps failed to see the full picture w.r.t. advantages/disadvantages of time based channel and atr based trailing stops. I hope you can follow my workmanlike explanation:

Generally when observing the diffusion of price over time you can look at it in two ways:

1) Define time axis(fix it) and let volatility vary. e.g. bar charts and channels
2) Define/fix volatility level and allow the time taken to achieve this, to vary. e.g. point and figure chart construction and in a certain way, ATR trailing stops.

The advantages/disadvantages of each method boil down to a "swings and roundabouts" kind of toss-up.

In your trailing stop example, while you assert that your ATR method allows you to lock in profits sooner for a given move, the flipside is that in rising volatility that accompanies breakouts from your entry range, your ATR trl exit can move up and get tagged for a small profit/loss, where the channel exit would simply ride it out and possibly deliver a bigger winner.

furthermore, if at the point of entry, the mkt then remains stationary, the channel exit will narrow/approach over time, where your ATRexit will stay more or less static in comparison.(channel widths have much higher %variance than ATR measures of the same length-they expand more and contract to a greater degree).

likewise near the end of a profitable (Up)trend, a channel may give back more than a (COMPARABLE/EQUIVALENT) ATR exit if a rapid reversal and decline occurs, but equally it may give back less if the market just transitions into a narrow quiet range which it later breaks down from.

To sum up, neither is better in the long run, but usually one is better than the other in a specific situation. using both will diversify your exits, and ensure you don't get caught out by the weakness of one or the other in a given mkt.


P.S. to understand what i meant by EQUIVALENT/COMPARABLE ATRexits/channel exits, i suggest you research Rescaled range and Hurst Exponents.

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