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 Post subject: Re: A new spread betting strategy
 Post Posted: Fri Dec 03, 2010 11:50 pm 
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I have to be honest, I am struggling to understand offthelip's option.
Keep it simple has always been my way of thinking.
I will stick to option 3 (2* highest atr of last three months)

Coincidentally the value calculated usually ends up somewhere the super trend indicator as well.

cheers
Andrew


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 Post subject: Re: A new spread betting strategy
 Post Posted: Sat Dec 04, 2010 7:41 am 
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Firstly let me thank everyone for taking part in this topic. It's certainly turning out to be interesting. With the 4 main voices in the development of this strategy spoken then I'm happy to say the voting is closed. It looks like we are going with offthelips suggestion. Sorry Andrew.

Here's an example of offthelips suggestion to clarify how it could possibly work.
We are still looking for values N, X & Y. Where X < Y


For long positions:
Set our stop below the low of the last N bars. Lets call it NLow
If NLow is between XxATR and YxATR then we use NLow. So XxATR >= NLow >= YxATR
If NLow is greater than XxATR then we use XxATR.
If NLow is less than YxATR then we use YxATR.

This is probably a lot to digest so here are some fictitious examples using N=2, X=1.5, Y=2.5
ATR = 10
NLow = 360
Close price = 380

Therefore
1.5xATR = 15 380-15=365
2.5xATR = 25 380-25=355

365 >= 360 >= 355 so we would use 360(NLow) as out stop level

If NLow = 350 instead of 360 then
Because 350 is below our lowest ATR value of 355(YxATR) then we would use the ATR value. So our stop would be 355

If NLow = 370 instead of 360 then
Because 370 is above our highest ATR value of 365(XxATR) then we would use the ATR value so our stop would be 365.

I have made several assumptions here for the sake of this example. This assumptions are things that we still need to decide upon. These are:

Do we use the close price to calculate our range or do we use some other price? Super trend uses the median(mid) price for the bar. What values of N, X & Y do we use? Oh and we need to decide on the time period for the ATR. Personally I like a 10 day ATR value, but this is open to discussion.

Short positions would work in the opposite way to this.

I hope this has helped with peoples understanding of how this would work. I know from my own point of view it seems straight forward but then being a software engineer I would think that. If there's anything that is not clear please let me know and I will try an explain it better.

I know this seems like a long winded way of determining a stop level, but from a programmers point of view this would be very easy to program into some kind of indicator that would give you this stop level based on a few input parameters.

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Harry,
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 Post subject: Re: A new spread betting strategy
 Post Posted: Sat Dec 04, 2010 7:23 pm 
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I couldn't have explained it better myself!! I think it is still pretty simple if you think about as: N * ATR unless N* ATR is a bit silly.
"off the lip"


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 Post subject: Re: A new spread betting strategy
 Post Posted: Wed Dec 08, 2010 1:33 pm 
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Ok so it's gone a little quiet. Maybe I confused people with my explanation. Hopefully not, but if you want me to try and explain it better please do let me know.

I'm going to suggest we use these values for N,X & Y
N= 3. So we use the low of the previous 3 bars. To be honest there is no real logic behind the value.
X = 1.5
Y = 2.5
And use a 10 bar ATR value

So we will use the ATR range 1.5*ATR(10) to 2.5*ATR(10).

I think using less than 1.5 ATR will cause to may early stop outs(Whipsaws) and more than 2.5 ATR will risk too much and possibly limit the number of trades available to us.

So unless there are any objections these are the parameters I suggest we use for initial stop placement. If no one objects we can move onto % of funds to risk and position size.

• Setup - DONE
• Entry triggers - DONE
• Stop placement - DONE
• % of funds to risk
• Position size
• When to move stops
• When to exit the trade
• Length of the trade
• Trade parameters to log

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Harry,
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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 09, 2010 9:53 am 
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• % of funds to risk - 1-2%
• Position size - % of risk & stop will determine what position size we can go for
• When to move stops - breakeven, then trail stop as per the ATR value
• When to exit the trade - never whilst its showing a profit + use trailing stop
• Length of the trade - potentially (ideally) forever?

Just some ideas.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 09, 2010 2:24 pm 
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Spread betting trader I like your enthusiasm but I think considering the last 5 items in the strategy in one hit is too much all at once. I think we need to consider each one in turn.
Sorry spread betting trader I appreciate your participation and I hope I don't come across as being rude. I know they are "Just some ideas" and I think it's best if we go through them one at a time.
That said I guess we can lump % of funds to risk an position size together as we already have our stop level and can position size accordingly.

I like the suggestion of 1%-2% of total funds to risk per trade. Personally I like to cap it at 1%. I started out risking 3% and it only takes a few losses before they start to stack up against you and your down 15 to 20%.

With putting a cap at 1% it means that we have to get 100 trades wrong in a row before it's game over and we've wiped out our account completely. With 2% it's 50 trades, 3% it's 33.3 trades. I know by risking less we are making less but I personally think keeping risk as low as possible without limiting our options is better.

I don't know what other people think about this?

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 09, 2010 3:46 pm 
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I think the % to risk is a bit dependent on the amount in the account. I think we need to be able to risk a minimum of £20, in order to avoid being excluded from higher priced shares on the LSE. This is calculated as follows:
For example to place a bet on BAT, current price 2377

Gekko which allows fractional bets quotes a minimum stake on BAT as 0.35
14 day AVTR for BAT is 30.5
Minimum distance for stop has been agreed as 1.5* AVTR
Thus Minimum risk on BAT is 0.35 * 30.5 * 1.5 = £16.01
Thus I suggest that for an account funded with £2000 a 1% risk is acceptable. If it is funded with less than this then we will more limited on what we can bet on, or we need to raise the limit to 2%.
It is never straight forward!!!


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 09, 2010 3:57 pm 
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I guess when it comes down to % of funds to risk it's really about personal preference. I personally prefer to limit my risk to 1% because that works for me. I am happy to sit on the sidelines and wait but others might not want to.

I think if we say Max risk 2% per trade it covers everything. That's the thing with spread betting strategies they are very personal. Just because we suggest max 2% now it won't stop some people risking 5, 10, 15%.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 09, 2010 8:41 pm 
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2% is OK by me.
I have been reading the 'phantom of the pits' pdf and am leaning towards killing an entry if it does not start moving in my favour within 4 or 5 bars, that way your not going to use up all of your risk.

cheers
Andrew


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 Post subject: Re: A new spread betting strategy
 Post Posted: Sun Dec 12, 2010 3:49 pm 
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Joined: Fri Nov 19, 2010 7:24 pm
Posts: 91
Harry, sorry for jumping the gun a little! Youre not being rude at all, to be honest I have been really busy over the last week so didnt know how much else I would be able to contribute to the thread.
Anyway, 2% max seems ok by me, like OTL says sometimes 1% can keep you out of trades if the share value is high and your platform doesnt allow fractional bets.

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