breakouts from base pattern - similarities to Turtle Method?

How do you know when a trend has started? Ended? This forum is for discussions about trend indicators and signals.
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billpritjr
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breakouts from base pattern - similarities to Turtle Method?

Post by billpritjr » Wed Dec 31, 2003 6:10 pm

Hello all

Happy New Year to everybody. I am a trend trader using primarily MA crossover but recently "discovered" that breakouts from a base pattern can be very rewarding. I use IBD data to determine underlying sector strength and accumulation/distribution activity also. I like breakouts with "A" Group and "A" or "B" Accum/Dist ratings.

My question is, I have not read the turtle rules in quite some time, and last night I re-read them, and came to the conlusion that using a 20-day breakout or 55-day breakout is pretty much the same thing I am doing (which I stumbled into after 3 years of trading and learning.). This is a very simplistic assessment, but for entry, am I correct?

Please see the charts below for examples of real stocks I actually owned based on "breakout" pattern. I use Amibroker to scan for new highs over last 60 days. A Buy Stop order is placed for the next day slightly higher than the previous days high in order to confirm trend.


http://stockcharts.com/def/servlet/SC.web?c=CLCT,uu[g,a]daolyyay[dc][pc50][vc60]&pref=G

http://stockcharts.com/def/servlet/SC.web?c=PETD,uu[g,a]daolyyay[dc][pc50][vc60]&pref=G


http://stockcharts.com/def/servlet/SC.web?c=NIAG,uu[g,a]daolyyay[dc][pc50][vc60]&pref=G


Some reading on the internet tells me that this method is known as "Channel Breakout", and was pioneered by who?.....Richard Donchian, who as we know helped implement the use of MA's and also inspired the Turtle Method.

Looking for comments, ideas, suggestions, etc!

Take care

BILL

verec
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Post by verec » Wed Dec 31, 2003 9:06 pm

Hmmm.

Using "channel breakouts", MAs, "Bollinger Bands" or the "Turtle Breakouts" seems indeed to fit in the same class of algorithms meant to detect the probable start of a trend. But even then, you're not guaranteed anything. For example, my tests on the Turtle System show that when the breakouts give you signals 3 times, 1 of it (on the average) becomes a profitable trade. (this is not meant to say that the Turtle System is not profitable, I beleive quite the opposite, but only to hilight the fact that a breakout signal as such, taken in isolation from a complete trading system, is mostly meaningless)

Also, some systems have entries done in one way, re-entries (after a whipsaw, for example) done another way, and some even do reversal entries (ie transform your stop being hit into starting a trade in the opposite direction).

So, focusing on the entry-signals only give you part of the formula. When to exit, how to place your stops and how much to place on any single trade are, IMHO, at least as important as deciding when to enter.

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