ATR based High Probability Experimental AMO Trading Strategy

[vinst]

Hi Gulugulu,
It may be premature but I tried a study on ABAN when it was in declining trend. The attached figure shows the trades where with starting capital of 300,000. 1/6th of this, 50000 was allocated. Trading in ABAN was recorded according to your suggestions presented in this thread. One deviation I made was that every month, I checked up average ATR14 for past 80 days and so this value is seen to change periodically. The absolute SL is taken according to initial value of average ATR14.
Your method of averaging, as presented till now, has lowered the loss from 11200 (~4% of total capital) to 6344 (~ 2% of total capital). brokerage is accounted for.
Good show !

Kindly see if i have done the right thing (approximately).

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please click on the image to get enlarged view.

regards,

 

[vinst]

Hi Gulugulu,
I hope that you would explain the method further since I am trying to do practice while I trade.
According to weekly charts, Aban has entered bullish phase, So i have bought 40 Aban on 28-Oct @ 424. average ATR14 for last 80 days (4 months) is 22.
so next buys of 10 Aban would be at 402,380... with absolute SL at 336 and next sell levels are 446,468, so on.
trade record:
28-oct-2011 bought 40@424.

 

[GuluGulu]

Vinst, I am very much pleased to see that you are taking a real interest in this method. Well, you already made some further research and back-test on the initial phase.

This is the most important part why we share trading ideas over here in TJ forum or any other forum...together with all great traders, we can always try to refine the methodology.

For example, the method I explained till now has many rooms to improve. Although most of the trader try to find the level where we should take profit and keep SL etc. I think the ATR method level could be much acceptable.

I do not know anything in computer programming and related software and seek help of traders who are brilliant in comp. programming, mathematical software such as Matlab etc. If you could try a simulation of the above ATR method for at least all Nifty50 stocks with last 1 year 5minute data....a computer program can perhaps select the best or most profitable stocks and different ATR levels for any stocks which yields more, for example, you may find, since last 1 year, ABAN may give good result with ATR/2 Levels, whereas SBIN performed better with 0.6ATR level etc. Hope you got my point.

But above is the refinement part. For the time being-I shall adapt what I have described earlier. BTW, have you checked the SBIN performance for last 2-3 days? Instead of hitting SL, it moved through the levels...adding more profit. Today itself it moved twice. In my observation, Price tries to moves these ATR/2 level at least once a day.

Vinst, if you wish, try real trade with this method....and let us know the result in 2-3 weeks. Can you please upload the Excel file you posted?

In next, I shall describe the method further; but give me few days more as I am also busy in some other works too.

 

[vinst]

Hi Gulugulu,

I am already trying with real trade on ABAN as I already indicated. the absolute SL has come very close to the weekly SL which I had when I initiated buy. it makes me more comfortable.
today's orders given to buy at 402 and sell at 446.
thanks,
vin

 

[mehtaka]

hello GLUGLU
Nice stratergy, and will be waiting for you to complete the rest 80% of it.
As of now one question, why ATR is taken for the last 4months ?
any paticular reason for this?

thanks

 

[GuluGulu]

Vinst, Please check ATR/2 for ABAN. It is around 9.2. Take roughly 9. So if you would have bought 40 @ 424, you should already have sold 10 @ 433.2, and if market comes down today...have the chance to buy back those 10 @ 424 again.

 

[vinst]

Vinst, Please check ATR/2 for ABAN. It is around 9.2. Take roughly 9. So if you would have bought 40 @ 424, you should already have sold 10 @ 433.2, and if market comes down today...have the chance to buy back those 10 @ 424 again.

will check

 

[GuluGulu]

OK, Today I have some time and I shall try to explain next part.

Till now what I have discussed is Buying and Selling securities. And I have tried to find what is the intermediate level for profit booking and stop-loss; and some money management.

Before I go to the next part, I shall see what else could be done in it according to your own comfort level.

1. You can buy 1 SBIN or 25% of securities @ CENTER price instead of 4 SBIN or full 100% of initial allocation. Then you can average down at each 25% ATR/2 level. In this case, in case the take profit level hits first, keep the profit and then you have no securities left to take profit in next level.

2. If you buy whole 100% securities @ CENTER price, you can sell whole 100% @ first ATR/2 Level...if that hits first.

3. Or you can go with original approach.

4. You can even modify the ATR/2 Take-Profit or Stop-Loss level also accordingly if you feel comfortable; like, instead of original 0.5ATR, you can choose 0.4, 0.6, 0.7ATR or even 2ATR as per your comfort level.

5. You can define your own rules of how much securities and what ATR level combination.

I have experimented with 0.5ATR and got success till now.

You can choose anything or alter this method as per your own comfort level. But once you choose the above two parameters; don't alter it again throughout the entire procedure.

So, once choosen, don't alter the following. Choose wisely.

A. How much securities to purchase @ CENTER price
B. TP or SL ATR level.

 

[GuluGulu]

In this 2nd part, I shall discuss about How to define profit and loss AMOUNT per trade.

At the end, our goal is to earn money. We are not going to fall in love with special securities like SBIN, Bharti, INFY and see the securities going into deep-red everyday and hoping it will recover some day. So, we must define some TP and SL level and should always strictly maintain that level. I have discussed this things in above posts.

Now we shall look how to use these levels in terms of "Amount of Money" gained or lost in each trade and how to calculate and stabilize that.

 

[vinst]

One factor (non-TA related) is that if we choose ATR/2 as our buy/sell points, brokerage will consume a large part of profits.
e.g., ABAN, ATR/2 is say 10, which is about 2% of current price. brokerage each side can be taken to be 0.3% (average). So for one pair of trades, net could be 3.3%, still not bad.
But if we take ATR as it is as step size, then a pair of buy/sell trades would yield 7.5 though frequency of trades will come down.
So