Monday, February 17, 2020

Tesla - letting the big trends run

The recent price rise in Tesla is just another example where people who got into the uptrend, and been able to let the trend takes its course, have been able to profit handsomely.

Here is that chart. Based on my own entry and exit rules, entering on 13 December at the $363 level would have generated open profits of more than +22R as of now, with the peak being at over +31R in February. If ever you want an example of letting your profits run, this is it:

Tuesday, December 31, 2019

What my trading rules are designed to do

Conceptually, robust trend following systems are designed around the basic principles of identifying and capturing directional price movement, without having layers of complexity or being tailored to individual markets.

This leads to volatility in the performance achieved, as market conditions move through phases of 'trendiness' and differing levels of price volatility, but that is the compromise to robustness.

Friday, December 27, 2019

Don't think you know better than your rules

"If you take emotion - would be, could be, should be - out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings." - John W Henry

In trading, hindsight can be a not-so wonderful thing. Your stop gets hit, kicking you out of a trade for a small profit. All of a sudden, price takes off in the direction you were looking to profit from, leaving you on the sidelines.

Take it from me. If it's happened once, it will happen a thousand times.

Is this type of event frustrating? Sure.

Friday, November 08, 2019

Using volatility contraction to increase your profits (part 2)

Following on from my previous post about the use of volatility-based position sizing, here is a little wrinkle you may want to consider:

Typically this type of position sizing method is calculated using a multiple of Average True Range over a specified 'look back' period, and is normally expressed as a pure monetary number. So, in the second example in the previous post, Stock B priced at $20 had a 2ATR reading of $1.