a onblur=”try {parent.deselectBloggerImageGracefully();} catch(e) {}” href=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/Cover.gif”img style=”float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 300px; height: 388px;” src=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/Cover.gif” border=”0″ alt=”" //abr /a onblur=”try {parent.deselectBloggerImageGracefully();} catch(e) {}” href=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/TTFig18.gif”/adivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivspan class=”Apple-style-span” style=”font-weight: bold;”span class=”Apple-style-span” style=”font-size:large;”TRADERS’ TIPS: TASamp;C a href=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/TradersTips.html#TT15″May Issue/a/span/span/divdivblockquote“span class=”Apple-style-span” style=”font-style: italic;”He was utterly fearless but never reckless.  He could, and did, turn on a twinkling if he found he was wrong/span.” — Jessie Livermore, American author, investor/blockquote/divdivIn this month’s issue of span class=”Apple-style-span” style=”font-style: italic; “span class=”Apple-style-span” style=”font-weight: bold; “Technical Analysis of Stocks amp; Commodities/span/span in the Traders’ Tips section, Sylvain Vervoort offers an analysis of trailing stop methods (specifically the Fixed-Percentage Trailing Stop) on a portfolio of 25 stocks for a backtest period ranging from 01/16/2003 until 11/10/2008.  Subscribers to Trade-Ideas PRO who use our event-based backtesting tool, a href=”http://www.trade-ideas.com/OddsMaker/”The OddsMaker/a, already understand the different premise these tools use to find high probability winning trades.  /divdivbr //divdivTo recap briefly The OddsMaker doesn’t just look at 25 stocks, à priori, to generate backtest results, it considers any stock that matched a desired pattern in the market, finds that stock, and applies the backtest’s rule set before summing up the results into a detailed set of totals: win rate, average winner, average loser, net winnings, and confidence factor.br //divdivSee Figure 3.  /divdivbr //divdivAs such we provide an alternative stop method for your consideration.  br //divdivbr //divdivspan class=”Apple-style-span” style=”font-weight: bold;”span class=”Apple-style-span” style=”font-size:large;”The Wiggle/span/span/divdivbr //divdivAt Trade Ideas we use a custom stop that takes into the account a stock’s 15 minute average volatility multiplied by the relative volume (an indexed ratio of what the current volume is over its historical volume of the stock at the time a trade is made).  This measure is called the a href=”http://www.google.com/search?hl=enamp;as_q=wiggleamp;as_epq=amp;as_oq=amp;as_eq=amp;num=10amp;lr=amp;as_filetype=amp;ft=iamp;as_sitesearch=trade-ideas.comamp;as_qdr=allamp;as_rights=amp;as_occt=anyamp;cr=amp;as_nlo=amp;as_nhi=amp;safe=images”wiggle/a./divdivbr //divdivThe wiggle can be further explained with an example of the stock NFLX.  NFLX’s a href=”http://www.trade-ideas.com/StockInfo/NFLX/NETFLIX_INC.html#Technicals”15 minute average volatility/a is $0.3306 / 15 minutes (a running 30-day average of 15-minute values).  If the relative volume of NFLX at the time of an alert is 1.5 (i.e., trading at 50% above what it normally trades at this time of the day of the alert based on accumulated volume of the day)/divdiv, then the wiggle is $0.50 (i.e., $0.3306 * 1.5).  Look up the volatility values of any stock at the /divdivTrade-Ideas.com a href=”http://www.trade-ideas.com/StockInfo/”Stock Research section/a.  Imagine using a $0.50 stop and attempting to stay in a GS short or long, chances are, you are right on the trade but get stopped out only to watch the stock do exactly what you thought it would – painful. The wiggle creates a customized stop out that takes into account the certain characteristics of each stock./divdivbr //divdivThe wiggle is used in the following strategy, “span class=”Apple-style-span” style=”font-weight: bold;”Long on % Down Stocks/span” and is based on the Trade-Ideas inventory of alerts and filters found in our flagship product, Trade-Ideas PRO.  The trading rules are modeled and backtested in its add-on tool, The OddsMaker./divdivbr //divdivspan class=”Apple-style-span” style=”font-weight: bold;”span class=”Apple-style-span” style=”font-size:large;”Description:  “Long on % Down Stocks” /span/span/divdivbr //divdivspan class=”Apple-style-span” style=”color: rgb(17, 17, 17); line-height: 18px; font-family:Arial;font-size:13px;”a href=”http://twitter.com/home/?status=RT+%40BrettBorders+How+to+Build+a+Strong+Reputation+With+Comments++http%3A%2F%2Fbit.ly%2Fswmsz” style=”padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; color: rgb(35, 97, 161); text-decoration: none; “img src=”http://farm4.static.flickr.com/3407/3482009810_05ce51e6d3_m.jpg” style=”padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; border-top-style: none; border-right-style: none; border-bottom-style: none; border-left-style: none; border-width: initial; border-color: initial; ” /  /aspan class=”Apple-style-span” style=”font-weight: bold;”span class=”Apple-style-span” style=”font-family:georgia;”a href=”http://twitter.com/home/?status=RT+@TradeIdeas+Here’s+How+to+Trade+Long+on+Down+Stocks+-+TASC+Traders+Tips++http://bit.ly/16SLJm”Click here to share this post on Twitter!/a/span/span/spanbr //divdivbr //divdivProvided by:/divdivTrade Ideas (copyright © Trade Ideas LLC 2009). All rights reserved. For educational purposes only.  Remember these are sketches meant to give an idea how to model a trading plan. Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for trading and investment results./divdivbr //divdivType or copy/paste this shortened string directly into a browser then copy/paste the full length link into Trade-Ideas PRO using the “a href=”http://www.trade-ideas.com/VideoHelp/Menu.html?video=Trade-Ideas%20Pro:%20Collaborationamp;mode=transcript”Collaborate/a” feature (right-click in any strategy window): /divdivbr //divdiva href=”http://bit.ly/1WrpZ”http://bit.ly/1WrpZ/a (case sensitive)/divdivbr //divdivYou can also build the strategy from Figure 1 below./divdivbr //divdivFigure 1 below shows the configuration of this strategy:/divdivbr //divdivimg src=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/TTFig16.gif” style=”float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 432px; height: 314px;” border=”0″ alt=”" //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivWhere 1 alert and 9 filters are used with the following settings:/divdivbr //divdivulli% down for the day, 3 %br //liliMin Price Filter = 5 ($)br //liliMax Price Filter = 40 ($)br //liliMin Spread = 10 (pennies)br //liliMax Spread = 150 (pennies)br //liliMax Distance from Inside Market Filter = 0.01 (%)br //liliMin Daily Volume Filter = 50,000 (shares/day)br //liliMax Daily Volume Filter = 2,000,000 (shares/day)br //liliMin Today’s Range = 55 %br //liliMin Up from Close = – 10 %br //li/ul/divdivThe definitions of these indicators appear here: a href=”http://www.trade-ideas.com/Help.html”http://www.trade-ideas.com/Help.html/a. br //divdivbr //divdivThat’s the strategy, but what about the trading rules?  How should the opportunities that the strategy finds be traded?  Here is what The OddsMaker tested for the past 4 weeks ending 3/16/2009 given the following trade rules:/divdivbr //divdivulliOn each alert, buy long the symbol (price moves up to be a successful trade)br //liliSchedule an exit for the stocks 30 minutes after entrybr //liliStart trading from the open and stop trading 5 minutes later (or 385 minutes before market close)br //liliSet a stop at $0.75 + the value of each stock’s wigglebr //li/ul/divdivbr //divdivThe OddsMaker summary provides the evidence of how well this strategy and our trading rules did.  The settings are shown here in Figure 2./divdivbr //divdivimg src=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/TTFig17.gif” style=”float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 432px; height: 255px;” border=”0″ alt=”" //divdiv /divdivbr //divdivThe results (last backtested for the 4-week period ending 03/16/2009) are as follows:/divdivbr //divdiv /divdivspan class=”Apple-style-span” style=”color: rgb(0, 0, 238); “img src=”http://www.traders.com/Documentation/FEEDbk_docs/2009/05/IMAGES/TTFig18.gif” border=”0″ alt=”" style=”float: left; margin-top: 0px; margin-right: 10px; margin-bottom: 10px; margin-left: 0px; cursor: pointer; width: 432px; height: 361px; ” //span/divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivbr //divdivThe summary reads as follows:  br //divdivbr //divdivblockquoteThis strategy generated 291 trades of which 229 were profitable for a win rate of 78.69%.  The average winning trade generated $0.42 in profit and the average loser lost $0.44.  The net winnings of using this strategy for 20 trading days generated $72.78 points.  If you normally trade in 100 share lots, this strategy would have generated $7278.  The z-score or confidence factor that the next set of results will fall within this strategy’s average winner and loser is 100%./blockquote/divdivbr //divdivspan class=”Apple-style-span” style=”color: rgb(0, 0, 238); “/span/divdivUnderstand these backtest results from The OddsMaker in more detail by reading the User’s Manual:  a href=”http://www.trade-ideas.com/OddsMaker/Help.html”http://www.trade-ideas.com/OddsMaker/Help.html/abr //divdivbr //divdivspan class=”Apple-style-span” style=”font-weight: bold;”span class=”Apple-style-span” style=”font-size:large;”Related Articles/span/span/divdivbr //divdivPrevious Trader’s Tips articles/divdiva href=”http://marketmovers.blogspot.com/search/label/TASC”http://marketmovers.blogspot.com/search/label/TASC/abr //divdivbr //divdivbr //divdiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/9446784-5669105288585345205?l=marketmovers.blogspot.com’//div

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