Back-test your stop sizes and see. 
The market reveals who we really are...
Well keep in mind this is kind of an experimental thing, ie nothing is fixed. Jacko only trades eu full stop so anything we come up with here is completely untested...so far the 45 has worked out ok, but Im open. I think clouds idea of the leave stop at breakeven and move it up after 100 could be ok too, especially based on the possibility that this is the bottom ...but definitely its all new ground we are covering here. And dammit I dont care how I just want to make pips every month ...
If we are to follow the Jacko method - we should use a trailing stop which is sensitive to the daily volatility of the pair. Jacko has increased his stop size as the volatility of the Euro has increased lately.
The Average True Range may give us some useful guidance as to an appropriate stop size. The average true range is the moving average of the true range for a given period. The true range is the greatest of the following:
* The difference between the current high and the current low
* The difference between the current high and the previous close
* The difference between the current low and the previous close.
The average true range is then calculated by taking an average of the true ranges over a set number of previous periods.
I've included a table from a Metastock exploration I run every week or so which details the Average True Range (ATR) for the instruments I trade over a variety of time-frames. The first column (FXtight) is 33% of the 90 day ATR and is the setting I use when placing a tight stop for forex, the next column in a medium stop setting (66% of the 90 day ATR) and is a more usual forex stop for me, the next set of columns are for various periods that traders commonly seem to use.
Interestingly, the changes in true range for each instrument over different time periods are quite small. There are some trends evident though:
* the Aussie and US Dollar pairs and Gold are slowly becoming less volatile;
* the Euro pairs are slowly becoming more volatile;
* US stock indices and Crude Oil are becoming more volatile.
I think the most useful thing that the ATR can tell us is the relative differences in daily volatility between currencies and how this might affect stop setting. For example, the daily volatility in US dollars for three different currencies can be quite large:
Aussie = 104 pips average true range over the past 90 days;
Cable = 165 pips average true range;
Euro = 147 pips average true range.
If Jacko still feels that 100 pips is the correct trailing stop setting for the Euro at present (about 66% of the ATR), that would equate to an Aussie stop size of about 70 pips. A 50 pip Euro stop would equate to a 35 pip Aussie stop if our tolerange for noise and volatility is the same for the two pairs.
- #283
- Jul 29, 2008 2:02am Jul 29, 2008 2:02am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
Never say never.
- #285
- Jul 29, 2008 4:08am Jul 29, 2008 4:08am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
I think youre right, theres no completely correct answer. As long as 45 brings in pips Im going to leave it, unless I come up with something that gives drastically better results...must be the summer heat making me lazy
, take care, Raz
, take care, Raz
Never say never.
- #287
- Jul 29, 2008 4:47am Jul 29, 2008 4:47am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
Never say never.
- #288
- Jul 29, 2008 6:54am Jul 29, 2008 6:54am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
Thing is, given that Jacko's method is not a scalping strategy, you could have quite a large stop and grab much of the swing before the change. The difficulty is in working out when it's run out of puff. That's why Jacko uses 100 pip stops on E/U. I think 80-90 is a sensible stop loss on A/U.
BTW looks like A/U is gathering up its skirts for a dash north.
update knocked out -1, we need to see 0.9499 before my AH is activated (jeez do I bother with an AH on a 1 pip loss
)
Never say never.
...fortune telling skills erm ... lol
Hey, I didn't say it would. I said, "it looks like" which is very much different to "it is". In other words, I never predict the market.
Technically, it is still more likely to head north until it breaches yesterday's low.
What we should be looking for is whether it breaches an 85 or 100 pip stop from yesterday's high. It would be interesting for gauging in a live setting whether 85 or 100 pips would mean we're still in a trade. (Of course, a single trade isn't enough to confirm but it will help.)
The market reveals who we really are...
- #292
- Jul 29, 2008 8:15am Jul 29, 2008 8:15am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
Never say never.
I know you were joking. I thought it would be interesting to explore what I meant, though.
That's the problem with trying a new pair, we're going through the investigatory process that Jacko went through a couple of years ago. I'm sure we'll work out the best stoploss size eventually.
Currently, if you had a 100 pip trailing stop, you'd be about 80 pips loss but still in the trade, so we'll have to see. Doesn't look promising, though.
I thought it would be interesting to explore what I meant, though.That's the problem with trying a new pair, we're going through the investigatory process that Jacko went through a couple of years ago. I'm sure we'll work out the best stoploss size eventually.
Currently, if you had a 100 pip trailing stop, you'd be about 80 pips loss but still in the trade, so we'll have to see. Doesn't look promising, though.
The market reveals who we really are...
- #294
- Jul 29, 2008 10:17am Jul 29, 2008 10:17am
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
I know you were joking.
That's the problem with trying a new pair, we're going through the investigatory process that Jacko went through a couple of years ago. I'm sure we'll work out the best stoploss size eventually.
Currently, if you had a 100 pip trailing stop, you'd be about 80 pips loss but still in the trade, so we'll have to see. Doesn't look promising, though.
Never say never.
- #295
- Jul 29, 2008 11:11am Jul 29, 2008 11:11am
- Joined Jun 2007 | Status: Be yourself, everyone else is taken | 2,734 Posts
- #297
- Jul 29, 2008 12:04pm Jul 29, 2008 12:04pm
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
Never say never.
- #298
- Jul 29, 2008 12:07pm Jul 29, 2008 12:07pm
- | Joined Mar 2007 | Status: Zoom out | 1,425 Posts
...fortune telling skills erm ... lol
update knocked out -1, we need to see 0.9499 before my AH is activated (jeez do I bother with an AH on a 1 pip loss
Never say never.