Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
27Activity
0 of .
Results for:
No results containing your search query
P. 1
ADVANCED Strategies

ADVANCED Strategies

Ratings: (0)|Views: 322|Likes:
Published by MisterSimple

More info:

Published by: MisterSimple on Feb 28, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

04/01/2014

pdf

text

original

 
56www.activetradermag.com
January 2004
• ACTIVE TRADER 
The multibar range
BREAKOUT SYSTEM
Breakouts of price channels can beprofitable — if the volatility is thereand you’re on the right side of thetrade. This stop-and-reverse systemtries to capture intraday trends inthe S&P E-Mini contract by recognizingdifferences in the characteristicsof up moves and down moves.
FIGURE 1 TRADESTATION CODE FOR THE MULTIBAR RANGE BREAKOUT SYSTEM{Strategy: #MultiBarRangeBO}
Input: n(45),bx(0.45),m(15),sx(0.45),XTime(1515);vars: hhv1(h),llv1(l),hhv2(h),llv2(l),ii(0),xb(c),xs(c);hhv1=h; llv1=l;for ii=1 to n-1 beginif h[ii]>hhv1 then hhv1=h[ii]; if l[ii]<llv1 then llv1=l[ii];end;value1=hhv1-llv1;hhv2=h; llv2=l;for ii=1 to m-1 beginif h[ii]>hhv2 then hhv2=h[ii]; if l[ii]<llv2 then llv2=l[ii];end;value2=hhv2-llv2;xb= c + (Value1 * bx);xs= c - (Value2 * sx);if time<XTime then beginif marketposition<=0 then Buy Next Bar xb stop;if marketposition>=0 then Sell Short Next Bar xs stop;end;if XTime<>0 then SetExitOnClose;
ADVANCED StrategiesBY DENNIS MEYERS, PH.D.
B
reakout systems are popular when markets arevolatile. Such systems typically identify supportand resistance levels when price has been movingin a range or channel, and enter trades when price breaks out of either the up side or down side of a channel.There are two simple ways to define support and resistancelevels for price channels. In both cases, it is first necessary todefine a lookback period. The first way is to use the highesthigh and the lowest low of the lookback period. The secondway is to determine the range of each bar (high minus low) andadd that range (or a percentage of it) to, or subtract it from, thecurrent close.In either case, the upper and lower boundaries represent theprice channel. One advantage to the second method is it betterreflects the volatility of the market — it will expand and con-tract as the volatility changes.Breakout strategies require the market to be in a high-volatil-ity period; a trade will become profitable only if it continues tomove in the direction of the breakout. Volatility and emotion gohand in hand. As volatility increases, traders have to cope withmore risk; hence, the more emotional the market becomes. Thisis often reflected by the fact markets fall faster than they rise.In the following system, the channel is determined by usingthe range of the price bars in the lookback period. Abreakoutabove or below the channel’s resistance or support creates buyor sell signals.
 
However, the parameters for the buy signals will bedifferent than those for the sell signals, because of thepropensity for markets to fall faster than they rise. Therange for the last
x
 bars will be defined as the highesthigh of the last
x
 bars (including the current bar) minusthe lowest low of the last
x
 bars (including the current bar).The buy price is determined by adding a percentageof the range of the last
n
 bars to the current close — thepreviously described volatility-adjusted technique. If the next bar’s price exceeds the buy price, the systemissues a buy signal. The sell price is determined bysubtracting a percentage (a
different
percentage thanthe buy percentage) of the range of the last
m
 bars fromthe current close. If the next bar’s price falls below thesell price, the system issues a sell signal.The resulting Multibar Channel Breakout systemwill trade the S&P500 E-Mini futures on an intraday basis using one-minute bars. The TradeStation Code isshown in Figure 1 (opposite page).
Multibar Channel Breakout rules
This is a stop-and-reverse system, meaning it is alwaysin the market: When a sell signal occurs, long tradesare exited and a short trade is entered; when a buy sig-nal occurs, short trades are exited and a long trade isentered. These are the system’s parameters:
ES =
E-Mini price;
BRange
= the price range over the last
n
 bars;
SRange
= the price range over the last
m
 bars;
bx
= the percentage multiplier of the BRange for buysignals;
sx
= the percentage multiplier of the SRange for sellsignals;
c
= the current price;
buyCh
= c + bx*BRange;
sellCh
= c - sx*SRange
where
n =
The number of lookback bars (including the cur-rent bar) for buy signals.
m =
The number of lookback bars (including thecurrent bar) for sell signals.Notice that not only are the percentage multipliersfor long (bx) and short trades (sx) different, the look- back periods the system references for buys (n) andsells (m) are also different. The trade rules are simple:
1. Buy rule:
Buy the next bar at buyCh, stop.
2. Sell rule:
Sell the next bar at sellCh, stop.
3. Intraday bar exit rule:
Exit the position on theclose (no overnight trades).Although it may not be immediately obvious, this sys-tem avoids the opening gap whipsaw problem —trades being triggered because of large gap openings
ACTIVE TRADER •
January 2004
www.activetradermag.com57
The system triggered more short trades during the test, but pro-duced profits on long trades, as well.
TABLE 1 MULTIBAR RANGE BREAKOUT SYSTEMPERFORMANCE SUMMARY, JULY 7 TO AUG. 1, 2003
Source: TradeStation
All trades Long trades Short tradesTotal net profit $4,912.50 $1,450.00 $3,462.50Gross profit $6,637.50 $1,912.50 $4,725.00Gross loss($1,725.00) ($462.50) ($1,262.50)Profit factor 3.85 4.14 3.74Open position P/L $0.00 $0.00 $0.00Total number of trades 55 20 35Percent profitable 58.18% 55.00% 60.00%Winning trades 3211 21Losing trades 22 9 13Even trades 1 0 1Avg. trade net profit $89.32 $72.50 $98.93Avg. winning trade $207.42 $173.86 $225.00Avg. losing trade($78.41) ($51.39) ($97.12)Ratio avg. winning/avg. losing 2.65 3.38 2.32Largest winning trade $700.00 $362.50 $700.00Largest losing trade($300.00) ($125.00) ($300.00)Largest winner as% of gross profit 10.55% 18.95% 14.81%Largest loser as% of gross loss 17.39% 27.03% 23.76%Net profit as% of largest loss 1,637.50% 1,160.00% 1,154.17%Max. consecutivewinning trades 5 5 4Max. consecutivelosing trades 5 2 3Avg. bars intotal trades 134.96 45.8 185.91Avg. bars inwinning trades 166.88 69.18 218.05Avg. bars inlosing trades 91.95 17.22 143.69Max. drawdown(intraday peak to valley)($887.50) ($862.50) ($975.00)Max. drawdown(trade close to trade close)($300.00) ($175.00) ($400.00)Max. trade drawdown($475.00) ($475.00) ($362.50)

Activity (27)

You've already reviewed this. Edit your review.
1 thousand reads
1 hundred reads
Prasanta Debnath liked this
ppaladine liked this
Punkpink Pink liked this
Raghu Nayak liked this
jcohen01 liked this
wh123 liked this
lizmerrill liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->