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 Post subject: Re: A new spread betting strategy
 Post Posted: Tue Nov 30, 2010 5:09 pm 
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Thanks for the post Tony. As you rightly point out we're discussing optimal stop placement for the strategy so we don't get stopped out too soon or risk too much.

With regards to position size and risk that will come later. Like you say the stop level is irrespective of money management. I think it's better to decide on where the stop should go for the strategy rather than almost 'randomly' placing it based on risk and position size. I think we need to consider risk separately and then position size based on the risk and stop position. There may be trades which meet our setup and entry criteria but do not meet out risk criteria. If this is the case then we will have to pass up the trade and wait until a trade that fits our risk comes along.

Of course we could do it the other way round and decide risk and position size first but I personally think this is the wrong way to go about it.

What do others think we should do here?

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 Post subject: Re: A new spread betting strategy
 Post Posted: Tue Nov 30, 2010 5:26 pm 
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I think your logic is correct, work out where the stop should be, then work out how many pips away that is from the entry price, then work what the stake would be to enter at the monetary risk we are prepared to place on this bet, finally look around and see if there is a platform on which to place the bet.
Just to add to the discussion about where to place the stop, what about taking Average true range into account, e.g. we could do something if the stop ended up closer than X* AVTR or if the stop ended up further away than Y* AVTR. X and Y TBD


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 Post subject: Re: A new spread betting strategy
 Post Posted: Tue Nov 30, 2010 5:26 pm 
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I have to admit to liking the ATRx2 approach. It seems to work quite well for me and keeps all trades at a manageable level even on small accounts. Only problems you encounter using ATR is on larger share prices. In those cases we could use something like (n)previous bars low as you suggested in your post. Just a case on deciding which previous bar to use.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Tue Nov 30, 2010 10:28 pm 
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I read something on Malcolm's site a while ago which I liked.

Take the highest ATR for last three months and multiply that by 2.

cheers
Andrew.


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 02, 2010 3:56 pm 
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Well thanks again for all the responses. I think we can all agree that using ATR in some form is going to determine out stop distance.

(1)Offthelip, If I've understood you correct are you suggesting that we get a stop level and then check if its between XxATR and YxATR where X and Y are numbers. For instance we choose to use the low of the last three bars. If this is between XxATR and YxATR then we use it. If it's outside this range we'd use either XxATR or YxATR. (whichever is closest to price). It's an interesting suggestion and certainly something that I have never considered. (If I've interpreted this wrong please let me know)

Or

(2)We can use 2xATR, as suggested by spread betting trader

Or

(3)We can use 2x highest ATR from the last 3 months (say 60 days, 5days a week, 4 weeks a month,) as suggested by Andrew

Well we have a dilemma on our hands. The only thing I can suggest it to put it too a vote. Lets number them 1,2,3. I thought I could add a poll to this forum but I can't seem to do it. Anyway just post your choice.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 02, 2010 4:10 pm 
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Yes , you have intepreted my suggestion correctly, it is really because if the low of the previous N days is very similar, we could end up with a stop very close even thought the share was qute volatile. Equally there may have been a spike down that blows the stop way out of a sensible range, in this case I am not sure we want to enter though!! Open to suggestions!!
"off the lip"


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 02, 2010 4:19 pm 
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I have to say I like the idea and I think the logic behind it is sound.

I was going to wait to cast my vote but I think you might be onto a winner so I'm voting for option 1.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 02, 2010 10:20 pm 
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One very slight modification to the wording of the strategy, just to avoid ambiguity:
Change the Phrase :"(whichever is closest to price)". to "Whichever is closest to the last n bar value)"
i.e. the stop must be between X* AVTR and Y *AVTR,
~X and y still TBD


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 02, 2010 10:27 pm 
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I forgo to say you have generated a lot of interest by start this topic, well done!!!


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 Post subject: Re: A new spread betting strategy
 Post Posted: Fri Dec 03, 2010 8:19 pm 
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Only just checked back on this thread now the weeks work is over. I like the suggestion by OTL for his ATRs so for the sake of argument I also vote for option 1.

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