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 Post subject: Re: A new spread betting strategy
 Post Posted: Tue Dec 14, 2010 5:10 pm 
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Thanks for all the responses on this. I know the topic has gone a little off the boil. Probably my fault for not getting enough time to push it forwards.

Anyway, there's no rush. So I think we've decided that we will risk a max of 2% of total funds on any given trade. I think we are probably all agreed that since we know the stop position and % of funds to risk we can calculate the position size accordingly. You can use my position size calculator if you want to.

So next I think we could potentially consider when to move stops, when to exit the trade and the length of the trade all together.

Since Spread betting trader suggested a trailing stop solution based on ATR this would cover all three items here.

I personally like the idea of the trailing stop based on ATR. It tells us when to move or stop, governs the length of the trade and can potentially land us with a huge reward to risk ratio. If we do go down this route we need to decide what value of ATR to use and what time period. We also need to consider what price to use when calculating the price at which to trail. Do we use the open, high, c lose, low, mid price or some other price level?

What do others think about this? Maybe others will want to suggest a profit target before we enter the trade and then our trade either hits this target or our stop loss. The possibilities are endless and it's made me realise that my strategy development page is going to need some updating to accommodate for all these possibilities.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Wed Dec 15, 2010 10:23 pm 
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I would be keen to get the stop up to breakeven asap,, however the question is do we move the stop in one jump when the low is above breakeven or do we move it up step by step to reduce risk on the way??


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 16, 2010 4:48 pm 
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we could potentially trail at low value of ATR until break even then let it widen as the trade progresses?

Or

we could trail below the low of the previous N bars, to break even then increase N to let the trailing stop widen.

There are many options here. I guess it's just going to come down to picking one we all like and going from there.

Anyone got any ideas that they like or currently use in their own strategies?

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 16, 2010 6:05 pm 
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The problem I have always found with this area of developing a strategy is how does one decide which is the best strategy. With picking entry trigger it is quite easy to test whether an entry condition gives one an advantage by back testing, on the assumption that the future might be the same. However testing stop movement it is difficult to get a statistically significant number of cases to test since the performance of the stop movement might be dependent on the entry trigger. I have found that to get a decent number of samples one is either going way back in history or moving into stocks that I normally wouldn't trade anyway.
Obviously from the above you can see that I have some faith in back testing, but I know that others don't so:....
Does anybody have any ideas as to what to do about this?? How do you decide how to move the stops??


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 16, 2010 9:54 pm 
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This was one of the reasons I moved to platforms with auto trailing stops. It took that side of trade management away from me so it was a completely un-emotional decision as it was automatic. The disadvantage to this is when a share spikes during a session moving up your trailing stop then drops back down close to your stop that same session. It only needs to drop a few points the next day to stop you out completely. And of course the day after that the share price always carries on its upward momentum.
So I've started to go back to manual stops on my new trades, purely so each night I can have a quick glance at those shares that have spiked and assess whether my to raise my stop or not.
Its like everything else, it all costs us time and it depends how much time you have to invest in all this or how much autonomy you want within your trading process.
Swings and roundabouts! Just for the record I manually trail mine at 2xATR, and some at 1.5xATR dependant on a share overall price.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Wed Dec 22, 2010 12:45 pm 
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Since we seem to have hit a brick wall with trailing our stop I think we may need to work on this. For the time being I'm going to suggest this and we can see how it goes.

Trail the stop at 1.5ATR until breakeven, then let the stop widen to 3ATR to give the trade more chance to progress without being whipsawed out of the trade.

We may want to play with these numbers but it may be something that we can only do through trial and error. Most strategies will need reviewing from time to time to see what can be improved and enhanced and gut feeling and experience also count for a lot. Therefore I think if we use the above solution for now with a view to reviewing it at a later date.


What do others think about this?

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 Post subject: Re: A new spread betting strategy
 Post Posted: Wed Dec 22, 2010 8:58 pm 
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Sounds ok to me! Pretty much how I do things now if I understand you correctly.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Wed Dec 22, 2010 10:56 pm 
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Are we trailing 1.5 ATR below todays Low ? or todays close? or some other price??


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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 23, 2010 9:34 am 
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Good point offthelip. I usually trail using the median/mid price. So this would be (high+low)/2

What do others think? I would say there are three main options we want to consider, either the low, the close or the median price.

If anyone else has any other suggestions feel free to add them.

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 Post subject: Re: A new spread betting strategy
 Post Posted: Thu Dec 23, 2010 11:12 am 
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I tend to look at the previous 3 months of daily ATRs just to see if the last days close ATR is a typical value for that share. If I notice some bigger values over the last 3 months I like to do 1.5x the largest value if it wasnt some 1 day anomaly. I feel that gives me a better shot at not being stopped out too soon.

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