October 17, 2007
Crude Climb
Here’s a look at the 30-minute chart of Crude Oil (generic first month CL future) as it moved above $88 yesterday.You can see that traders who have been using a simple, tight trailing stop have captured some nice gains over the last several days.
(Bloomberg’s “Trender” is a proprietary study, but it looks like a pretty simple trailing stop based on average true range — you can adjust its sensitivity from 1 to 10 and I usually use 3 regardless of time frame. One neat trick is to enter multiple Trenders of different sensitivities on the same chart (example) — this will give you a kind of “multiple time frame” view of trend. You can also adjust it to reverse on close or reverse on cross; I usually use reverse on close.)
Cat: | Time: 10:42 am (utc+8)
October 18th, 2007 at 2:43 am
really much different than an optimized moving avg?
p.s. nyt
October 18th, 2007 at 6:35 am
pete: I don’t know the formula, but it looks like an exponential moving average of ATR … anyone who has the time and patience to monkey with it could quickly figure out the exact formula.
NYT? I’m still waiting for $12. ;-) (Morgan Stanley sold a ten million share block this morning.)
October 18th, 2007 at 6:45 am
It looks more like a volatility stop to me.
October 18th, 2007 at 7:05 am
dayo: Sure, Average True Range is a measure of volatility.
October 29th, 2008 at 4:19 pm
Hi, Chairman:
Any idea on how to determine the trend? I read the docs in Bloomberg, it saids on the up trend, it plots the lower boundry while in down trend it plots the upper boundry. Thanks!
Xiang
October 29th, 2008 at 4:28 pm
Xiang: A million people have asked me for the Trender formula but I don’t know it, and the people who do know it ain’t sharing it. :)
October 30th, 2008 at 9:50 am
Hi Chairman,
If you come across the formula of Trender please do share it.
Thank you
October 30th, 2008 at 11:28 pm
After Chairman’s challenge, I am forced to give the secret research results:
After much research from examples, I created a percentage stop that looks very very close to Trender values.
Trender is a simple percentage trailing stop behind the price. For instance, you can create a 40-day 15% trender by picking the highest close in the last 40 days and calculate a 15% stop for that. Keep doing that until price closes below that.
Then find the lowest of the last 40days and calculate a 15% up for that and start plotting it.
So in effect, it is the same as using a trailing percentage stop to exit and using it to enter again.
A caveat:
Trender looks fantastic on charts and works outstandingly well when market trends (and everybody is following trendfollowing :)
But you should make sure to manually take its signals on end of day data, else the intraday swings will whipsaw you too much. Also, trender looks this good when you use a wide percentage stop. However during a ranging market the wide stop kills you.
—
It is an improvement over Wilders Parabolically rising SAR and there is a Russian paper on this percentage trend which seems to have inspired Ablesys.
Ravi