Here's an obvious bit of research that might help control risk.
We already suspect that a very wide BB range is less likely to break out and hit target. Where the BB range is lower than the current 10d BB range average, performance so far in 2011 is 13 targets hit, 3 stopped out (81%): if the BB range is higher than the current 10d BB range average, performance is 2 targets hit, 7 stopped out (22%).
Using this information, even though it's limited, you could either waive trades with a BB range wider than the 10d average or reduce your position size: if you're aggressively minded, you could increase position size on trades based on a low BB range.
10d average BB range going into today's session is 32.4pts.
We already suspect that a very wide BB range is less likely to break out and hit target. Where the BB range is lower than the current 10d BB range average, performance so far in 2011 is 13 targets hit, 3 stopped out (81%): if the BB range is higher than the current 10d BB range average, performance is 2 targets hit, 7 stopped out (22%).
Using this information, even though it's limited, you could either waive trades with a BB range wider than the 10d average or reduce your position size: if you're aggressively minded, you could increase position size on trades based on a low BB range.
10d average BB range going into today's session is 32.4pts.
brewski1984
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what about the old 14atr rule?
Yes brew - could be equally applicable to filter the opportunities from the threats. BB range was just easy to derive from my recent records and certainly appears meaningful.
Mark Fisher's similar ACD method, which I am only just reading about, also takes account of a 'pivot range' which he calculates to indicate bands of support or resistance. These are derived from the previous three days' price action. I am sceptical that s/r can be meaningful at a price level at which there has been no significant trading (another example would be s/r at a MA), but it's hard to argue with such an authority.
Mark Fisher's similar ACD method, which I am only just reading about, also takes account of a 'pivot range' which he calculates to indicate bands of support or resistance. These are derived from the previous three days' price action. I am sceptical that s/r can be meaningful at a price level at which there has been no significant trading (another example would be s/r at a MA), but it's hard to argue with such an authority.
wallstreet1928
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Yes, another very poor week, 1 target hit, 4 stopped out. Hopefully, if using reduced size positions due to the current poor run of results, the actual financial damage has not been too great.
Over 4 weeks I make it 10 targets hit, 10 stopped out, no trades expired. As we've had two of the three worst weeks recorded in the last 4, I regard a 10-10 record as encouraging.
I am thinking next week I will avoid trading on days when the BB range exceeds the 10d Av. BB range to further cap risk. Taking trades only when the BB range was lower than the 10d Av. over the last 4 weeks would have given an 8-4 performance instead of the 10-10 recorded. There might be other measures like using a percentage of ATR, open to ideas.
Over 4 weeks I make it 10 targets hit, 10 stopped out, no trades expired. As we've had two of the three worst weeks recorded in the last 4, I regard a 10-10 record as encouraging.
I am thinking next week I will avoid trading on days when the BB range exceeds the 10d Av. BB range to further cap risk. Taking trades only when the BB range was lower than the 10d Av. over the last 4 weeks would have given an 8-4 performance instead of the 10-10 recorded. There might be other measures like using a percentage of ATR, open to ideas.
brewski1984
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Ive been meaning to have a look at whether extending the entry point to +/- 5/10/15 points etc. As you suggested a few posts back makes any difference but I haven't had time yet. Hopefully over the weekend or Monday I can test these. It might give a better confirmation of a breakout.
brewski1984
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Nice call!
I move to v5 rules from Monday. The changes are - avoiding trading on any day where BB range is > average of last 10 BB ranges: and, cancelling unexecuted entry orders and closing open positions at1:00pm. I will also be slightly increasing position size from one-third normal to 50%.
brewski1984
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A trailing stop would have been awesome today by the looks of it. I still haven't had time to test those entry settings but I will do just out of interest somewhen.
isatrader
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Hi tomorton, you might be interested in my trading group thread. It would be good to add a FTSE Index trader to the mix. I've currently got 8 people trading a range of stocks (UK and US), forex, commodities and the DAX. Everyone submits their highest conviction trade for the following week by the end of the day on Sunday and then they trade it on the thread during the week. Performance has been really good so far and we use ATR Adjusted percentages to judge performance and make it fair across all products. Here's the link if you are interested:
http://www.trade2win.com/boards/swing-position-trading/116688-one-trade-week.html
http://www.trade2win.com/boards/swing-position-trading/116688-one-trade-week.html
That's a nice idea isatrader, but If I was any use at such things I wouldn't be trading mechanical systems like BB! I was swing trading the FTSE100 index for 7 years until I found BB, and with only inconsistent success: the most annoying part about it was that when I did well, I could not review and see why I had done well - my rewards seemed (and perhaps genuinely were) random. Thanks, but you're better off with people who are better at it than me.
brewski1984
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I see it was over 40 point range again this morning, did you trade it today?
Sat this one out according to the rules. I will check the chart later but on Tuesday and Wednesday it would actually have been profitable to BB trade in spite of the large ranges.
This market is a strange creature right now though with Libya, Bahrain and Japan situations so I'm more happy than usual to be flat.
This market is a strange creature right now though with Libya, Bahrain and Japan situations so I'm more happy than usual to be flat.
brewski1984
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I see it as a loss today, I'm still building up a nice big spreadsheet of data for all these trades to see what it looks like over a couple months, as I'm sure you are as well. It does seem to be very strange at the moment.
No trade for me today as BB range is beyond 10d average. For the week that means for me 1 trade only, which hit target, plus 4 no-trades making it 1-0 to me. Hurray! Aiming to continue trading at 50% normal position size at most next week.
Over last 4 weeks, performance is not good - 7 targets hit, 9 stopped out, 4 no-trades. Only the second negative rolling 4-week performance recorded (from September).
If the 10d BB range average rule had been applied throughout the period, as well as this week, results would have been 5 targets hit, 3 stopped out, 8 no-trades. The no-trade decision would have been the right one 7 times, wrong 4 times: today remains to be seen.
Over last 4 weeks, performance is not good - 7 targets hit, 9 stopped out, 4 no-trades. Only the second negative rolling 4-week performance recorded (from September).
If the 10d BB range average rule had been applied throughout the period, as well as this week, results would have been 5 targets hit, 3 stopped out, 8 no-trades. The no-trade decision would have been the right one 7 times, wrong 4 times: today remains to be seen.
