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Hi, Graham:
The empirical relationship you developed for ATR as a function of price
is interesting, but I doubt one can make a universal statement of its
veracity (and I'm not suggesting you are). ATR simply reflects the
extent to which traders and the rest of the market bid up the price
value of a given security. If the company suddenly comes out with an
unexpectedly bad (or good) earnings report, the price will become
highly volatile for an undefined period of time. This is due only to
human (emotional) supply and demand forces and is independent of price.
A $10 stock that just announced a huge earnings report or made a new
discovery will shoot up very fast. As the price soars, so, too, does
its volatility. This could just as easily happen to a $100 stock
(remember the "irrational exuberance" of hi tech stocks in the late
90s?). So, I really don't think one can make a general statement that
price directly affects volatility. It is only a function of the
excitement and/or uncertainty that traders impart to the underlying
price. Volatility and uncertainty are synonyms. I like to plot the
indicator 100*ATR(20)/C directly on the price chart to get a quick
picture of the volatility of a given stock at any time. Typically, this
figure may vary between 1.5 and 5% or more. Stocks whose ATRs are much
higher than 5% of the price are considered highly volatile, regardless
of the price. Just my 2 cents.
Al Venosa
Graham wrote:
Sorry I did not fully explain myself
Using ATR as a straight value is not overly meaningful to me. I much
prefer
to use ATR v Price as a measure of volatility. I did a study a short
while
ago into the relationship between ATR and price and found that the
actual
values can be plotted to provide a statistical relationship of the type
ATR
= n * C ^ m. Where m is a quadratic function of period for ATR ( m =
a*p^2 +
b*p + c ) p is period length, a,b,c,n are constants
It is true the ATR increased with price but the relative volatility
ATR/C
decreased.
Just my thoughts
Cheers,
Graham
http://e-wire.net.au/~eb_kavan/
-----Original Message-----
From: Pal Anand [mailto:palsanand@xxxxxxxxx]
Sent: Tuesday, December 14, 2004 3:51 AM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: PositionSize / Capital
Really? I just calculated ATR(14) for stock (Guess?, Inc. on NYSE)
GES. It is a $12.15 stock and the value was 0.608 and for AMZN
(Amazon.com Inc., on Nasdaq) which is a $40.13 stock and the value
was 1.317, more than double.
Because of this, ATR readings can be difficult to compare across a
range of securities. Even for a single security, large price
movements, such as a decline from $50 to $10, can make long-term ATR
comparisons problematical.
Just a refresher:
Wilder started with a concept called True Range (TR) which is defined
as the greatest of the following:
The current high less the current low.
The absolute value of: current high less the previous close.
The absolute value of: current low less the previous close.
If the current high/low range is large, chances are it will be used
as the TR. If the current high/low range is small, it is likely that
one of the other two methods would be used to calculate the TR. The
last two possibilities usually arise when the previous close is
greater than the current high (signaling a potential gap down and/or
limit move) or the previous close is lower than the current low
(signaling a potential gap up and/or limit move). To ensure positive
values, absolute values are to be applied to differences.
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Graham" <gkavanagh@xxxx> wrote:
> It is my experience that volatility is normally inverse to price
> Higher price = lower volatility
>
> Cheers,
> Graham
> http://e-wire.net.au/~eb_kavan/
>
> -----Original Message-----
> From: Pal Anand [mailto:palsanand@x...]
> Sent: Monday, December 13, 2004 2:45 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: PositionSize / Capital
>
>
>
> ATR shows volatility in absolute terms (cannot predict direction
or
> duration, only activity levels), so, lower price stocks will have
> lower ATR levels than higher price stocks. A $10 stock would have
a
> much lower ATR value than a $50 stock, hence, one would end up
buying
> more shares of the $10 stock than the $50 stock.
>
> rgds, Pal
> --- In amibroker@xxxxxxxxxxxxxxx, "danielwardadams"
> <danielwardadams@xxxx> wrote:
> >
> > I was gone most of the day so didn't have a chance to keep up
with
> > the posts.
> >
> > I agree that the results are the opposite of what one would
expect.
> I
> > think in the cases you cite, the formulas should be
> 100,000*Risk/ATR.
> > So if your risk tolerance is 2% and the ATR is 2, the
position
size
> =
> > 100,000*.02/2 = 2000/2 = 1000 where the 1000 is shares of
stock
and
> > is independent of the price of the stock, i.e., you can buy
1000
> > shares of ANY priced stock that has an ATR of 2 and your risk
would
> > be the same. In the case of the $50 stock, your position
equity
> would
> > be $50*1000 = $50,000 when ATR=2. Similarly, you could buy
> > twice (not half) as much of the stock when ATR=1.
> >
> > Although the position sizing being independent of the price
of
the
> > stock seems counterintuitive, I just reread the chapter in
Van
> > Tharp's book on this ("Trade Your Way to Financial Freedom")
and
I
> > think that's the way it's supposed to be.
> >
> > I'm not sure what this means for our 20% maximum position
equity
> > allocation (to achieve diversification).
> >
> > Dan
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, Al Venosa
<advenosa@xxxx> wrote:
> > > Ed:
> > >
> > > Your formula doesn't make much sense to me. The term
stoploss/ref
> > (C,-1)
> > > is simply the volatility of the stock, expressed as a
fraction
of
> > the
> > > price, times a multiplier. Thus, for a $50 stock whose
ATR is,
> say,
> > 2
> > > (highly volatile), and if you are using a multiplier of
2 with
an
> > equity
> > > of $100 K, then your positionsize statement specifies
that the
> > position
> > > size of the trade will be only $8,000 (100,000 * 4/50).
For a
> less
> > > volatile stock (one whose ATR is only 1), then your
positionsize
> > would
> > > be only $4,000. So, you are allocating less money for
less
> volatile
> > > stocks and more money for more volatile stocks, and the
amount
> > allocated
> > > in each case is tiny relative to your equity. This is
the
> opposite
> > of
> > > what volatility-based trading is all about. Did you
leave
> something
> > out?
> > >
> > > Al Venosa
> > >
> > > ed nl wrote:
> > >
> > > > well I just mentioned this because the range is
rather
narrow.
> > When
> > > > testing this MM stuff on my system I noticed that
it behaved
> very
> > poor
> > > > especially between 1998 and 2001. This is exactly
the period
> the
> > > > markets were very volatile. SInce volatility
reduces the
> position
> > > > size my system hardly invested any money.
> > > >
> > > > I tried giving risky trades more weight using (not
sure if
this
> > is
> > > > correct but it does approximately what I intended):
> > > >
> > > > *PositionSize* = -100 * (stopLoss / Ref(*C*,-1));
> > > > this as I expected gives a better result than just
using a
> > constant
> > > > percentage over the last 3 year and also better
than the
> correct
> > MM
> > > > approach. Between 1998 and 2001 however it performs
worse,
> > suffering
> > > > when the market goes crazy.
> > > >
> > > > rgds, Ed
> > > >
> > > >
> > > >
> > > > ----- Original Message -----
> > > > *From:* danielwardadams
<mailto:danielwardadams@xxxx>
> > > > *To:* amibroker@xxxxxxxxxxxxxxx
> > <mailto:amibroker@xxxxxxxxxxxxxxx>
> > > > *Sent:* Sunday, December 12, 2004 4:06 PM
> > > > *Subject:* [amibroker] Re: PositionSize /
Capital
> > > >
> > > >
> > > > I love it. This also helps avoid the tiny
positions
> somebody
> > (Al?)
> > > > mentioned yesterday (and I've experienced
also). But why
do
> > you say
> > > > it will usually probably use the 10 or 20%
sized
positions?
> > Shouldn't
> > > > that mean you're setting your risk parameter
> unrealistically
> > low?
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx
> > > > <mailto:amibroker@xxxxxxxxxxxxxxx>, "ed
nl" <ed2000nl@x
> > > > <mailto:ed2000nl@x>...> wrote:
> > > > > This way you can use a range: Maximum 20%
minimum 10%
of
> > equity:
> > > > >
> > > > > rsk = -2; // 2%
> > > > > PositionSize = Min(-10,Max(-20,rsk *
Ref(C,-1) /
> stopLoss));
> > > > >
> > > > > In practice it most of the time it
probably either uses
> 10%
> > or 20%.
> > > > >
> > > > > Ed
> > > > >
> > > > >
> > > > >
> > > > > ----- Original Message -----
> > > > > From: danielwardadams
> > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > Sent: Sunday, December 12, 2004 3:40 PM
> > > > > Subject: [amibroker] Re: PositionSize /
Capital
> > > > >
> > > > >
> > > > >
> > > > > Al & Ed,
> > > > > This is exactly where I ended up
yesterday (hours
after
> > my post).
> > > > > When I tried it, though, I always ended
up taking the
> 20%
> > > > positions
> > > > > rather than those defined by my risk.
Thinking it
> wasn't
> > working,
> > > > I
> > > > > gave up and went to bed.
> > > > >
> > > > > But since someone else thinks this
should work,
> obviously
> > I need
> > > > to
> > > > > play with it some more.
> > > > >
> > > > > Dan
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "ed
nl"
> <ed2000nl@xxxx>
> > wrote:
> > > > > > Al,
> > > > > >
> > > > > > about the part: "Your suggestion
to limit
> > positionsize not to
> > > > > exceed any more than 20% of equity may
be the
solution
> > since it
> > > > goes
> > > > > hand in hand with the philosophy of
money management.
> > That is, do
> > > > not
> > > > > allow any one position to exceed, say,
10 or 15
percent
> > of your
> > > > > equity. The Turtles did that, and I
think lots of
> traders
> > do
> > > > that,
> > > > > too. So, I see nothing wrong with that.
Have you
coded
> > this in
> > > > AFL"
> > > > > >
> > > > > > I think you can solve this using:
> > > > > >
> > > > > > rsk = -2; // 2%
> > > > > > PositionSize = Max(-20,rsk *
Ref(C,-1) / stopLoss);
> > > > > >
> > > > > > now it will never use more than 20%
of equity.
> > > > > >
> > > > > > About the minimum number of trades
I don't know. In
> my
> > system
> > > > that
> > > > > would be impossible because sometimes
good entries
just
> > dry up
> > > > and I
> > > > > can't find even find 5.
> > > > > >
> > > > > > rgds, Ed
> > > > > >
> > > > > > ----- Original Message -----
> > > > > > From: Al Venosa
> > > > > > To: amibroker@xxxxxxxxxxxxxxx
> > > > > > Sent: Sunday, December 12, 2004
3:11 PM
> > > > > > Subject: Re: [amibroker] Re:
PositionSize /
Capital
> > > > > >
> > > > > >
> > > > > > Dan:
> > > > > >
> > > > > > Thanks for the ideas. You're not
rambling; you're
> > thinking,
> > > > and
> > > > > this discussion is healthy. Good ideas
may stem from
the
> > > > discussion,
> > > > > so by all means, keep posting.
> > > > > >
> > > > > > I don't think you need a new
built-in function
> called
> > MinPos.
> > > > > Maybe TJ came up with a solution the
other day by
> > suggesting you
> > > > set
> > > > > the max open positions to some large
value like 10 of
> 15,
> > even
> > > > though
> > > > > you plan to take on no more than 5 at
any time. So,
if
> > you don't
> > > > use
> > > > > up all your equity using
volatility-based
> positionsizing,
> > you
> > > > might
> > > > > add on new positions with this approach.
I haven't
> tested
> > this
> > > > idea
> > > > > yet, but I will. The problem occurs when
the opposite
> > happens,
> > > > > namely, all your equity is used up
before you are
able
> to
> > add
> > > > your
> > > > > 4th and 5th positions. Your suggestion
to limit
> > positionsize not
> > > > to
> > > > > exceed any more than 20% of equity may
be the
solution
> > since it
> > > > goes
> > > > > hand in hand with the philosophy of
money management.
> > That is, do
> > > > not
> > > > > allow any one position to exceed, say,
10 or 15
percent
> > of your
> > > > > equity. The Turtles did that, and I
think lots of
> traders
> > do
> > > > that,
> > > > > too. So, I see nothing wrong with that.
Have you
coded
> > this in
> > > > AFL?
> > > > > I'm like Yuki: good with concepts buy
lousy with
> creative
> > > > > programming.
> > > > > >
> > > > > > Al Venosa
> > > > > >
> > > > > > danielwardadams wrote:
> > > > > >
> > > > > >
> > > > > > After thinking about this some
more, I think
all
> > I've
> > > > described
> > > > > is
> > > > > > what could be accomplished with
two more built-
in
> > > > variables.
> > > > > MinPos
> > > > > > could say you want no less than
some minimum
> number
> > of
> > > > > positions (5
> > > > > > in my example) and
MaxPositionSize could say
you
> > want to
> > > > > allocate no
> > > > > > more than X% of capital to any
one position
(20%
> in
> > my
> > > > example).
> > > > > >
> > > > > > Within these constraints, your
actual position
> > sizing
> > > > methond
> > > > > could
> > > > > > be anything you want.
> > > > > >
> > > > > > I'm probably rambling .........
> > > > > >
> > > > > > Dan
> > > > > >
> > > > > > --- In
> amibroker@xxxxxxxxxxxxxxx, "danielwardadams"
> > > > > > <danielwardadams@xxxx>
wrote:
> > > > > > >
> > > > > > > Al & Anthony,
> > > > > > > I've also seen the lower
returns for
volatility
> > based
> > > > versus
> > > > > equal
> > > > > > > equity position sizing in
the past and didn't
> > know what
> > > > to do
> > > > > about
> > > > > > > it (assuming I wanted more
positions for more
> > > > > diversification).
> > > > > > >
> > > > > > > I'm not sure how one would
code it in .AFL,
but
> > would the
> > > > > following
> > > > > > > represent a reasonable
compromise?
> > > > > > >
> > > > > > > (1) Start with an equal
equity based model
> based
> > on,
> > > > say, 5
> > > > > > > positions (position size =
-20). So each part
> of
> > the pie
> > > > > equals 20%
> > > > > > > of total equity.
> > > > > > > (2) Determine actual
position size within
each
> > piece of
> > > > the
> > > > > pie
> > > > > > based
> > > > > > > on volatility based
sizing. So, depending on
> your
> > risk
> > > > > parameter,
> > > > > > one
> > > > > > > might use only 17% of one
piece of the pie,
13%
> of
> > > > another
> > > > > piece,
> > > > > > and
> > > > > > > 20%, 8%, and 11% of the
other pieces.
> > > > > > > (3) Sum the used portions
of the pie (in this
> case
> > > > > 17+13+20+8+11 =
> > > > > > > 69%) and see what you have
left. 31% in case.
> > > > > > > (4) Allocate the remaining
cash according to
> the
> > equal
> > > > equity
> > > > > > model.
> > > > > > > This means you get one
more 20% piece of pie
> and
> > only
> > > > have
> > > > > 11% cash
> > > > > > > remaining.
> > > > > > > (5) Apply the above using
your ATR based
> position
> > sizing
> > > > > > recursively
> > > > > > > until your cash is
minimized. So if you only
> are
> > able to
> > > > use
> > > > > 9% of
> > > > > > > the piece of pie left in
(4) you take the 11%
> > left from
> > > > that
> > > > > piece
> > > > > > > plus the 11% cash and you
have 22% -- enough
> for
> > another
> > > > > position.
> > > > > > So
> > > > > > > in this case you end up
with 7 positions and
> only
> > 2% left
> > > > in
> > > > > cash.
> > > > > > > So your cash is minimized
and all your
> positions
> > adhere
> > > > to
> > > > > the ATR
> > > > > > > based position sizing.
> > > > > > >
> > > > > > > Like I say, I have no idea
how to code it but
> > intuitively
> > > > it
> > > > > makes
> > > > > > > sense to me.
> > > > > > >
> > > > > > > Thoughts/comments?
> > > > > > >
> > > > > > > Dan
> > > > > > >
> > > > > > > (And, yes, I'm sure I'm
not the first person
to
> > think of
> > > > it
> > > > > so my
> > > > > > > apologies to those who
have gone before).
> > > > > > >
> > > > > > > --- In
amibroker@xxxxxxxxxxxxxxx, "Anthony
> > Faragasso"
> > > > > > <ajf1111@xxxx>
> > > > > > > wrote:
> > > > > > > > Hello Al,
> > > > > > > >
> > > > > > > > You stated:
> > > > > > > >
> > > > > > > > "the lower the
volatility, the lower the
risk
> > and
> > > > > therefore, the
> > > > > > > smaller the positionsize
for that stock. "
> > > > > > > >
> > > > > > > > Is this a correct
assumption ? ...Would you
> > want a
> > > > larger
> > > > > > > positionsize on a less
risk position , and a
> > smaller
> > > > position
> > > > > on a
> > > > > > > more volatile one ?
> > > > > > > >
> > > > > > > > Anthony
> > > > > > > > ----- Original
Message -----
> > > > > > > > From: Al Venosa
> > > > > > > > To:
amibroker@xxxxxxxxxxxxxxx
> > > > > > > > Sent: Saturday,
December 11, 2004 7:53 AM
> > > > > > > > Subject: Re:
[amibroker] PositionSize /
> > Capital
> > > > > > > >
> > > > > > > >
> > > > > > > > Ed,
> > > > > > > >
> > > > > > > > I, too, have
confirmed many times with
> > backtesting
> > > > what
> > > > > you
> > > > > > > report, viz,, that
positionsize = -x gives
> better
> > > > performance
> > > > > > results
> > > > > > > than using
volatility-based MM
positionsizing.
> > The non-MM
> > > > > code I've
> > > > > > > used in the past is:
> > > > > > > >
> > > > > > > > posqty =
Optimize("posqty",5,2,10,1); //
> no.
> > of
> > > > stocks
> > > > > active
> > > > > > at
> > > > > > > any given time
> > > > > > > > PositionSize =
-100/posqty; //equal
equity
> > model
> > > > > > > >
> > > > > > > > I think I know what
the problem is, but I
> > have not as
> > > > yet
> > > > > > figured
> > > > > > > out how to solve the
problem with AFL. If you
> use
> > the MM-
> > > > > based
> > > > > > > positionsize statement as
we have discussed
> (equal
> > > > volatility
> > > > > > model),
> > > > > > > i.e., PositionSize = -1 *
C/StopAmt, and
> examine
> > the
> > > > > tradelist, you
> > > > > > > will likely discover that,
often, not all 5
> > stocks are
> > > > active
> > > > > all
> > > > > > the
> > > > > > > time. In other words,
either you have idle
> capital
> > > > earning
> > > > > nothing
> > > > > > or
> > > > > > > you have fewer active
stocks than you want.
Why
> > is this?
> > > > > Because
> > > > > > some
> > > > > > > stocks, which might not be
as volatilie as
> > others, use up
> > > > > more of
> > > > > > > your capital to initiate a
position than a
more
> > volatile
> > > > > stock.
> > > > > > > Consequently, your capital
is used up before
> you
> > have a
> > > > > chance to
> > > > > > > enter into your 4th or 5th
stock. Instead of
> > having 5
> > > > open
> > > > > > positions,
> > > > > > > you might only have 3
because of this.
Checking
> > > > positionsize
> > > > > > > shrinking doesn't help
because you'll
discover
> > you might
> > > > have
> > > > > tiny
> > > > > > > positions in your 5th
stock. The fewer stocks
> you
> > have,
> > > > the
> > > > > less
> > > > > > > diversified you are, and
therefore the more
> risky
> > your
> > > > > portfolio.
> > > > > > The
> > > > > > > more risk, the higher the
DDs. This problem
> > cannot happen
> > > > > with the
> > > > > > > equal equity model since
all positions are
> equal
> > in size,
> > > > by
> > > > > > > definition.
> > > > > > > >
> > > > > > > > One possible way
around this might be to
> > increase
> > > > your
> > > > > margin
> > > > > > so
> > > > > > > that equity is expanded
enough to allow full
> > funding of
> > > > all
> > > > > > > positions. But, again,
this also increases
your
> > risk.
> > > > Another
> > > > > way
> > > > > > > might be dynamically
setting your risk to fit
> the
> > > > volatility
> > > > > of
> > > > > > each
> > > > > > > stock individually (the
lower the volatility,
> the
> > lower
> > > > the
> > > > > risk
> > > > > > and
> > > > > > > therefore, the smaller the
positionsize for
> that
> > stock).
> > > > > However,
> > > > > > > this changes your model so
that you no longer
> > have equal
> > > > > > > volatility/equal risk
(getting closer to the
> > equal equity
> > > > > model).
> > > > > > So,
> > > > > > > the problem remains
unsolved for the moment.
I
> > have not
> > > > had
> > > > > time to
> > > > > > > devote to cracking this
problem yet, but some
> day
> > I hope
> > > > to
> > > > > do
> > > > > > this.
> > > > > > > If you have any ideas, I'm
all ears.
> > > > > > > >
> > > > > > > > Al Venosa
> > > > > > > >
> > > > > > > >
> > > > > > > > ed nl wrote:
> > > > > > > > Thanks for your
effort Al. It is very
> clear,
> > > > > > > >
> > > > > > > > In one of my
earlier posts I posted
> > > > > > > >
> > > > > > > > // money
management block
> > > > > > > > stopLoss =
Ref(bbb*ATR(20),-1);
> > > > > > > > // trade risk
> > > > > > > > tr =
IIf(Buy,(stopLoss /
> > BuyPrice),stopLoss /
> > > > > (ShortPrice +
> > > > > > > stopLoss));
> > > > > > > > //
renormalisation coefficient
> > > > > > > > rc = 0.02 / tr;
> > > > > > > > // positionsize
> > > > > > > > PositionSize = rc
* -100
> > > > > > > >
> > > > > > > >
> > > > > > > > it actually gives
the same result as
your:
> > > > > > > > PositionSize =
-2.0 * IIf
> > > > (Buy,BuyPrice,ShortPrice) /
> > > > > stopLoss
> > > > > > > > except for short
positions. Exact the
> same
> > it would
> > > > be
> > > > > if I
> > > > > > > use: tr =
IIf(Buy,(stopLoss /
> BuyPrice),stopLoss /
> > > > > (ShortPrice));
> > > > > > > >
> > > > > > > > Unfortunatelly I
do not get better
> results
> > this
> > > > way.
> > > > > Using
> > > > > > just
> > > > > > > a simple PositionSize =
-10 still gives
> somewhat
> > better
> > > > > results.
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > rgds, Ed
> > > > > > > >
> > > > > > > >
> > > > > > > > ----- Original
Message -----
> > > > > > > > From: Al Venosa
> > > > > > > > To:
amibroker@xxxxxxxxxxxxxxx
> > > > > > > > Sent: Saturday,
December 11, 2004
4:19
> AM
> > > > > > > > Subject: Re:
[amibroker]
PositionSize /
> > Capital
> > > > > > > >
> > > > > > > >
> > > > > > > > ed nl wrote:
> > > > > > > >
> > > > > > > > Al,
> > > > > > > >
> > > > > > > > but how do
you implement the risk
> > factor now?
> > > > > > > >
> > > > > > > > ed
> > > > > > > > Ed:
> > > > > > > >
> > > > > > > > Let us suppose
you have established
> your
> > risk as
> > > > 1%
> > > > > (i.e.,
> > > > > > > the maximum you are
willing to lose on a
> trade).
> > Let us
> > > > also
> > > > > > suppose
> > > > > > > your initial equity is
$100,000. So, if the
> stock
> > you buy
> > > > (or
> > > > > > short)
> > > > > > > goes down by the amount
based on your system,
> you
> > lose
> > > > only
> > > > > $1000,
> > > > > > > keeping you in the game.
Now, let us say you
> > defined your
> > > > > > volatillty-
> > > > > > > based stop in terms of
2*ATR(20), which you
> > incorrectly
> > > > > assigned to
> > > > > > > the variable
TrailStopAmount. I
> say 'incorrectly'
> > because
> > > > the
> > > > > > > TrailStop in AB was
designed to mimic the
> > Chandelier
> > > > exit,
> > > > > which is
> > > > > > > basically a profit target
type of stock (it
> hangs
> > down
> > > > like a
> > > > > > > chandelier from the
highest high since the
> trade
> > was
> > > > > initiated, if
> > > > > > > long). I don't think you
want the TrailStop
to
> be
> > your
> > > > money
> > > > > > > management stop. Rather,
the MM stop is the
max
> > stoploss,
> > > > > defined
> > > > > > as:
> > > > > > > >
> > > > > > > > StopAmt =
2*ATR(20);
> > > > > > > >
ApplyStop(0,2,StopAmt,1);
> > > > > > > >
> > > > > > > > So, if your
stock declines by 2*ATR
(20)
> > from your
> > > > > entry,
> > > > > > you
> > > > > > > exit with a 1% loss. Let's
take an example.
> Stock
> > A is
> > > > > selling for
> > > > > > > $40/share. It's ATR(20) is
$1/shr or 2.5% of
> 40.
> > Your
> > > > stop
> > > > > amount
> > > > > > is
> > > > > > > 2*ATR(20), which is
$2/shr. How much stock do
> you
> > buy?
> > > > You
> > > > > simply
> > > > > > > divide your risk, $1000,
by 2*1, which is 500
> > shares.
> > > > This
> > > > > amounts
> > > > > > to
> > > > > > > an investment of $40/shr *
500 shrs or
$20,000.
> > All of
> > > > this
> > > > > can be
> > > > > > > coded in one simple line
of AFL plus the 2
> lines
> > above
> > > > > defining the
> > > > > > > MM stoploss:
> > > > > > > >
> > > > > > > > PositionSize =
-1 * BuyPrice/StopAmt;
> > > > > > > >
> > > > > > > > where -1 is 1%
of current equity
(0.01
> *
> > 100,000
> > > > or
> > > > > $1000),
> > > > > > > BuyPrice = $40/shr, and
StopAmt is 2. Keep in
> > mind that a
> > > > > negative
> > > > > > > sign means 1% of CURRENT
equity, which means
> > compounded
> > > > > equity, not
> > > > > > > just a constant initial
equity of $100,000.
If
> > you carry
> > > > > through
> > > > > > the
> > > > > > > above math with your
renormalization
coefficient
> > > > notation,
> > > > > you wind
> > > > > > > up with the exact same
answer.
> > > > > > > >
> > > > > > > > One more thing.
When you place your
> order,
> > > > assuming
> > > > > you are
> > > > > > > trading with EOD data, you
do not know what
the
> > buyprice
> > > > is
> > > > > until
> > > > > > you
> > > > > > > buy the stock, which is
the next day. So,
what
> > most
> > > > traders
> > > > > do is
> > > > > > > base their positionsize on
the closing price
of
> > the night
> > > > > before
> > > > > > the
> > > > > > > entry. Therefore, to place
an order in the
> > evening to be
> > > > > filled in
> > > > > > > the morning at the open,
your positionsize
> > statement
> > > > would
> > > > > actually
> > > > > > > be:
> > > > > > > >
> > > > > > > > PositionSize =
-1 * C/StopAmt;
> > > > > > > >
> > > > > > > > where C is the
closing price on the
> night
> > before
> > > > you
> > > > > buy.
> > > > > > So,
> > > > > > > if you use the code
SetTradeDelays(1,1,1,1),
> then
> > the
> > > > above
> > > > > formula
> > > > > > > is OK. However, if you use
SetTradeDelays
> > (0,0,0,0), then
> > > > you
> > > > > have
> > > > > > to
> > > > > > > ref the C back a day.
> > > > > > > >
> > > > > > > > This is
probably more information
than
> > you were
> > > > > asking
> > > > > > about,
> > > > > > > but I hope it helps.
> > > > > > > >
> > > > > > > > Cheers,
> > > > > > > >
> > > > > > > > Al Venosa
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > > Check AmiBroker web
page at:
> > > > > > > > http://www.amibroker.com/
> > > > > > > >
> > > > > > > > Check group FAQ at:
> > > > > > >
> > > >
http://groups.yahoo.com/group/amibroker/files/groupfaq.html
> > > > > > > >
> > > > > > > >
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> > > > > > > >
> > > > > > > >
> > > > > > > >
> > > > > > > >
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