Hey guys, Someone posted on this site last week that Vol Breakouts are high-profit setups. I couldn't agree more. In terms of how I trade: FX: I wait for a strong Volatility breakout and look for attenuation of the move. I then set a wide stop and look to take the opposite side of the most recent move. Equities: I trade thin, expensive stock (AHC, PD, SLB) and I look for a sharp vol breakout and safety in the NYSE Open Book. My problem: Too few intraday opportunities. I'm so used to trading the same stock (I mostly trade AHC) that I don't really have a way to look at a brand new stock and understand what would be a vol breakout for that particular stock. I'm pretty confident in my ability to sense attenuation, but does anyone here have a single indicator that they use to filter for this? I'd like to expand my universe of stocks utilizing a more systematic volatility breakout/fading strategy. I know, longshot asking this. Thanks though!
I use a similar strategic setup for trading fx; exploiting the 'calm before the storm' effect. My position sizing is inversely proportionate to volatility before entry. The lower the volatility (flatter the market) the more i put on when i get a trigger. How i measure 'volatility' prior to the move is a trade secret Its actually pretty simple. Can you design your own indicator to measure the behavior yourself?
My strategy in FX, which I feel is more prone to swing trading due to the absence of opening gaps, takes the opposite side of the most recent volatile move as I feel it's attenuating. I look for volatility to leave the market. I set a wide stop and looking for a retracement. It never ceases to amaze me how many traders think that an obviously attenuated move with will persist and not reverse.
Interesting to know who might be taking the other side of my trade. I don't pretend to be batting 1.000% More like 25 - 30% - which is far to low for some people. But the wins make up for the losses and the style fits my psychology, so im happy.
I follow your work with great interest. In fact, your posts helped me perfect my exit strategy - trendlines on a higher time frame. May I ask who is Connors Hayward?
"Investment Secrets of a Hedge Fund Manager" by Laurence A. Connors & Blake E. Hayward http://www.amazon.com/gp/product/15...102-6756031-6597726?n=507846&s=books&v=glance Also, check it out: http://www.elitetrader.com/vb/showthread.php?threadid=19821&perpage=6&pagenumber=3
Hi Fader, I am working on trading systems for the FX markets and I want to setup a system for fading. I followed your threads on the other forum and was sorry to see you go. My thought was to use Average true range to determine that a large move has happened, but how would you define when a move is attenuating? Robert
Thanks for the links. I had already taken a look, but was trying to engage Jack. Guess he didn't bite