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Registered User
Joined: 9/21/2005
Posts: 566
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Hey Diceman,
If you had gone long on CG back in March when we discussed it or went long on PPD in mid-April (on decision point approach) how would you have managed the trade in terms of profit taking and/or exiting the position? Let's assume for this question that you approached these trades as swing trades rather than position or long-term investments.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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If we call my indicator DPO (decision point oscillator)
One method would be to trade the cycles.
(like the 25/75 zones in stochastic)
If you look at CG add a % true indicator (green) :
((ABS(XAVGC3-XAVGC8)+ABS(XAVGC5-XAVGC8)+ABS(XAVGC10-XAVGC8)+ABS(XAVGC12-XAVGC8)+ABS(XAVGC15-XAVGC8))/XAVGC8)*100<.5
Add a % true (red) :
((ABS(XAVGC3-XAVGC8)+ABS(XAVGC5-XAVGC8)+ABS(XAVGC10-XAVGC8)+ABS(XAVGC12-XAVGC8)+ABS(XAVGC15-XAVGC8))/XAVGC8)*100>5
I chose .5 as a buy area and 5 as a sell area by eye. There may
be better values. The CG chart illustrates the concept well
of buying a cycle low and selling a cycle high.
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Another concept would be to add a trend screen. So that you
don't buy a DPO low in a down trend. For example a %
true indicator:
XAVGC5>XAVGC20 (a 5 period moving avg is > a 20)
This would show CG tradable with DPO cycles from
10/6/06 to 04/20/07
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Another concept would be instead of selling over 5 on DPO.
At some high level (4 or more) switch to a tight stop:
Yesterdays low
Lowest of last 2 days
Lowest low of last 3 days (and so on)
This type of thing would keep you in the PPD April trade.
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Another very short-term technique would be to use
expansion of DPO as a trend (very short-term) indicator.
Percent-true indicator:
(((ABS(XAVGC3-XAVGC8)+ABS(XAVGC5-XAVGC8)+ABS(XAVGC10-XAVGC8)+ABS(XAVGC12-XAVGC8)+ABS(XAVGC15-XAVGC8))/XAVGC8)*100)>(((ABS(XAVGC3.4-XAVGC8.4)+ABS(XAVGC5.4-XAVGC8.4)+ABS(XAVGC10.4-XAVGC8.4)+ABS(XAVGC12.4-XAVGC8.4)+ABS(XAVGC15.4-XAVGC8.4))/XAVGC8.4)*100)
This is DPO>DPO five bars ago.
Once again I would add some type of trend filter. Such as
Close > 21 bar moving average and maybe 21 bar mav
going up by a certain amount.
(This is also interesting to define profit zones on weekly
and monthly charts)
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Realize that all this is off the top of my head and there
may be better parameters and set-ups. Realize also
that I tried to make everything with DPO to illustrate
that a very simple concept can be expanded into many
ideas and indicators. That cover a wide range from
short-term to long-term. I also added simple filters
to improve "false" trades. (5>20 and C>21)
For example on CG if you bought on the first valid
DPO buy (using the 5>20 screen) and used the
5>20 as an exit. You would have brought in the
10/23/06 zone and sold in 4/20/07. So all of a
sudden we have a long-term trend following
system.(because we changed our exit method
to something longer-term)
The key is to experiment. Some ideas will fall
flat and others will be useful. You cant tell until
you investigate.
Thanks
diceman
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Registered User
Joined: 1/28/2005
Posts: 6,049
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One slip of the tongue.
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This:
Percent-true indicator:
(((ABS(XAVGC3-XAVGC8)+ABS(XAVGC5-XAVGC8)+ABS(XAVGC10-XAVGC8)+ABS(XAVGC12-XAVGC8)+ABS(XAVGC15-XAVGC8))/XAVGC8)*100)>(((ABS(XAVGC3.4-XAVGC8.4)+ABS(XAVGC5.4-XAVGC8.4)+ABS(XAVGC10.4-XAVGC8.4)+ABS(XAVGC12.4-XAVGC8.4)+ABS(XAVGC15.4-XAVGC8.4))/XAVGC8.4)*100)
This is DPO>DPO five bars ago.
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Should be DPO>DPO four bars ago.
Thanks
diceman
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Registered User
Joined: 9/21/2005
Posts: 566
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Thanks, Dice, you rock. Amazing that you offer such great advice free of charge.
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