FORUMS BROKERS SOFTWARE
Home
 
    Forums > Technically Speaking > Strategy (System) Design > Is anyone using volatility based stops?


Reply
 
Thread Tools
Old Mar 8th, 2012, 07:27 AM   #1
Runningbear
 
 
Join Date: May 2002
Posts: 1,707
Does anyone on ET have any experience with volatility based stops? Has anyone tested volatility based stops vs fixed stops? Do they test better and how are people calculating them?

My gut instinct tells me that a percentage of weekly range would work? Or is monthly better?

All feedback welcome

cheers,

Runningbear
    Quote
Old Mar 8th, 2012, 10:13 AM   #2
jcl
 
 
Join Date: Jan 2012
Location: http://dictionary.of-the-infinite.com
Posts: 407
I found that stops based on a 1-week ATR generate about 20% more profit than fixed stops.

But this depends on your strategy and should be tested and optimized - gut instinct is no good here.
    Quote
Old Mar 8th, 2012, 10:50 AM   #3
justrading
 
 
Join Date: Apr 2011
Location: Bangkok
Posts: 1,590
When I was swing trading stocks, I used to use 2x the 20 day EMA of the Daily ATR, updated daily.

Worked well keeping me in the trades, but I found that if I used that exclusively as a trailing stop, I would give back too much profit. For example if I caught a nice move and hit 30% profits, it could fall back to 20% - 24% before taking me out.

After a few times, I took a leaf out of O'Neil's book and when profits reached 25%, I would tighten the stop to 1x ATR.

If you trade a longer timeframe and look at weekly or monthly charts, then use an equivalent ATR. I was trading off daily charts.
    Quote
Old Mar 8th, 2012, 11:13 AM   #4
TheGoonior
 
 
Join Date: Oct 2009
Posts: 884
You may want to take a look at something called a "Chandelier" stop which was conceived by Chuck Lebeau
Basically it's a volatility based stop which trails off the extreme price of a movement (highest high for long, lowest low for a short).
It's not perfect, but it can help you keep a decent amount of those parabolic moves without tightening you up so quickly that you get shaken out.
    Quote
Old Mar 9th, 2012, 07:59 AM   #5
tomorton
 
 
Join Date: Apr 2003
Location: Exeter, UK
Posts: 15
Currently using trailing stops at 5-day ATR while swing trading stocks. I am adjusting this with each successive day's range of course so that the ATR5 is effectively rolling. Performing well so far but the main advantage might be that profitable positions close in profit, it prevents me setting a target way out of reach.
    Quote
Old Mar 9th, 2012, 11:26 AM   #6
futurecurrents
 
 
Join Date: May 2002
Posts: 6,781
Thanks for bringing this up. I hadn't thought of this one. Now you're going to make me do more work !! I'll post my results. I do currently have a volatility screen on one of my strats to allow it to work only under certain volatility levels and it tests out well.
    Quote
 
Reply
Thread Tools

Forum Jump



   Conduct Rules   Privacy Policy   Sitemap Copyright © 2014, Elite Trader. All rights reserved.   

WHILE YOU'RE HERE, TAKE A MINUTE TO VISIT SOME OF OUR SPONSORS:
Advantage Futures
Futures Trading & Clearing
AMP Global Clearing
Futures and FX Trading
Collective2
Automated Trading Services
CTS
Futures Trading Software
dom993trading.com
NinjaTrader Consulting
eSignal
Trading Software Provider
FXCM
Forex Trading Services
Global Futures
Futures, Options & FX Trading
Interactive Brokers
Pro Gateway to World Markets
JC Trading Group
Direct Access Trading
MB Trading
Direct Access Trading
NinjaTrader
Trading Software Provider
optionshouse
Option Trading & Education
Rithmic
Futures Trade Execution Platform
SpeedTrader
Direct Access Trading
SpreadProfessor
Spread Trading Instruction
thenut-trader.com
FX, Gold, & Stock Signals
TradersStudio
System Building & Backtesting
Tradier
Equity and Options Trading
Trading Technologies
Trading Software Provider