New on the blog
Posted by The Lonely Trader on July 13, 2008
A revised business plan is posted on a new page: Business Plan.
Excursion studies are posted on a new page: Excursions.
These pages are still under development and are posted to solicit feedback on how to improve them — and how to make them more interesting and relevant to other traders. There will be a number of new pages on rolling technical and fundamental studies.
New on the blogroll:
Finally! Hat tip to HPT for this very cool and useful blog. And thanks to whomever is behind the blog for the excellent information.
caprica said
I liked your new page on excursion studies. Are you able to tell me why are you using excursion rather than just calculating the average true range off a weekly chart?
The Lonely Trader said
Glad you like it — work in progress. I use excursions to fine tune my exits and my stops. Depending on the time frame and the model, I may use excursions based off of daily bars or hourly bars. I prefer to use the HL of the previous bar, and then take a simple average of a series (usually 20 or 21 periods). You’ve already seen that it’s similar to ATR. I just prefer it this way. For exits, I’ll look at how long I want to hold the trade, and then base my calcuations off of that. For example, if I want to hold the trade for three days, I’ll go for 3×62%ADR (or 186 pips on an instrument with a 100 tick average daily range). For my stops, I again use a percent value calculated off of the average. For example, if I’m trading on the hourly charts, I take a look at the average daily excursion over 21 days or some similar length (depending on how “spikey” price is, I may omit some days), and then use a percentage of that as my first stop guideline — but then I look at logical stop levels as well, which can be round figures or technical areas where stops and options barriers are clustering. If volatility is increasing on the Cable (which often has sharper retracements — or backing and filling — than USDJPY), for example, I often determine where a 70% daily ADR would be to start, and then I look for a confluence of factors that tell me where stops might be lurking. If the former is closer to my entry, I move the stop beyond the area indicated by the latter. I do the opposite if the former is farther from my entry. There is also the day’s wave structure and pending news releases to consider. If, for example, price has already moved as much as the average daily range, then I may tighten my stop a bit if I’m fading them move. I may widen it if I’m trading the move. If there is an interest rate or an NFP announcement, I incorporate this into my calcuations. It all depends on the signal (or trade idea), the time frame, and the context of the market.
I’ll explain all this stuff in more detail as I complete the business plan page — I’ll be adding some info from my trading plan templates there.
This page currently only has charts, but there will be tables at the top when I’ve settled on a format for the info summary. Do you have any ideas about what would make this page more useful?