How to use properly the NxATR stop Loss

Discussion in 'Risk Management' started by naftalinex, Aug 25, 2007.

  1. Hi to all,
    Firstly, I can declare that I did some statistic researches about this problem: The NxATR(10 for example) StopLoss method. How to adjust properly the N parameter.
    I know how to do that, there is a math-statistic relationship and I discovered that every time frame has its own N. Again , for the same time frame , every instrument has its own N , extremely stable over long long time. Something like the human personality.
    Now , what I propose you is this:
    I'd like to have an ExcelSpreadSheet, or any other program who implemented the VanTharp Random Entry System.
    In exchange, I'll disclose with you these my extensive research results.
    The reason why is this:
    1. I want to understant exactly the VTharp system .I read the chapter in his book, but.. it is not very clear: How large the initial risk, aso
    2. I want to run this experiment using my scientifical approachment in choosing properly the N-parameter.
    I tottaly agree with you in saying that the key is money management ( managing the exit also...) so this is the reason why I'm aware for the fact that my results worths.
    Thaks in advance,
  2. You make a salient point that markets have their own personalities.

    On the exit hypothesis has anyone gotten a random entry 100% mechanical rule based strategy to work? The whole concept of an "edge" is trading on YOUR terms. I find it difficult to conceive creating an edge when you start on the markets terms with a random position.

    And if you could find an edge there you are REALLY good and therefore might consider using your talents on the entry where you can really show off that talent.
  3. Hi joe,
    Thanks for your nice words, but you missed the point.
    I asked here for an exchange: a programmer able to write a random entries trading system simulation following my ideas about how to protect the profits.
    No philosophy, nothing more than an exchange!
  4. For your purposes in would be sufficient for testing your idea to just ask your software to buy on the even number times frames and sell on the odd number time frames. For example on a 60 minute chart you would buy 2 o'clock 4 o'clock etc. Then after that test change all the buys to sells and the sells to buys. If all you want to test is your money management hypothesis that will be plenty random enough.

    If you succeed I hope you will post your results. Personally I believe this concept is one of those ivory tower theories or perhaps even a shell game where your tricked into taking your eye of what is really going to help you. If proven wrong I'd pay homage.
  5. You can study the data and make your own judgement about whether Van Tharp's random entry strategy, found on page # 253 of his book Trade Your Way to Financial Freedom, does or does not "work". Someone posted source code to perform the tests, and a bunch of test results, on Curtis Faiths website

    Here is one picture that shows one set of results. A total of 8919 trades were entered at random, and of those, 4444 were longs (49.83%) while 4475 were shorts (50.17%). This test used a portfolio of 10 commodity futures markets, and $100 per contract was deducted on each trade, as an estimate of slippage and commissions. But if you wanted to, you could download the code and run it on other instruments instead. Forex pairs, stocks, spreadbets, ETFs, whatever you wish.

  6. Could someone write a code following my instructions in order to give a scientific approachment to the correct /objective selection of N multiplier?
    Here are what I mean:
    I think about a very simply system / yet real time self-adaptive that follow basically the rules Basso-Tharp, but the entries are not random, but simply Sell/Buy/Sell/Buy..., the market itself deciding /( by means of my algorithm if enter a Buy/ Sell position.
    Then, the position will be managed using a self-adaptive NxATR method .
    I know is a novelty and I ask you to help me . Simply because I'm not a programmer!
    Thanks a lot to anyone wants to help me.
  7. Thats a great explanatory chart --thanks. If your in a raging directional trend and one of your exits is a trailing stop, or stop and reverse with certain conditions, then a random entry will suffice. Even then though, I would think it would be better still with an entry based on an edge.

    I may be behind the curve on this, but I think a very good system can be created with very mundane exits and a good entry technique. I do not think a very good system can be created with good exits but a random entry. Of course greater minds then mine could prove me all wrong.
  8. OK guys,
    Could anyone programm a piece of SW testing my criteria upon how to choose the NxATR parameter?
    Thanks, Nafty
    PS: Forget abour random entry systems! Waste time!
  9. Yes here are six people who could program a piece of SW testing your criteria:

    These people are professional programmers and they charge money for their services. You will need to decide how much money you are prepared to pay for the software, and compare this against the price quotes you receive from the programmers. Maybe the software isn't very important to you after all; not important enough to justify spending 500 Euros (or whatever they happen to quote) on a programmer.
  10. Nafta,

    Are you offering ideas to be tested systematically ?

    If so as long as its end of day data, its not much work for me if you have an explicit set of statements

    if and or... etc to be tested.
    #10     Aug 27, 2007