Trading Systems and Money Management : A Guide to Trading and Profiting in Any Market

volatility. But because volatility works both ways, without the stop loss, some of the large winners actually started out as lar ...

trades, the standard deviation of the returns will also decrease. Thus, the system will be less risky to trade, and consequently ...

into a new trade that is still open on the day the second trade started in the origi- nal system. Note that the second trade in ...

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CHAPTER 18 Exits Basically, there are four major reasons to exit a trade:
Limiting a loss
Taking a profit
End of event
M ...

or 1 dollar, or whatever) than with you by three units (percent, dollars, etc.). Call me a bad systems developer, but I believe ...

working system, money management will make more of your bottom line than the actual entry and exit rules themselves. Taking a Pr ...

To be effective, then, a trailing stop must increase the number of winning trades so that the resulting system’s slightly smalle ...

a point when the risk outweighs the diminishing reward for being in the trade. That is when you should exit and ready yourself t ...

and when do we decide that we should get out and ready ourselves for another trading opportunity? As is the case with the end-of ...

CHAPTER 19 Placing Stops Basically, two ways can determine where to place a stop, both in relation to the entry price and in rel ...

0.2) or 30 percent (3 / 10 0.3), which is a difference of 50 percent (20 / 30
1 0.5). Should you change in the middle of a t ...

Percent Stops The percent stop method is the more straightforward of the two correct methods used in this book. Simply put, it p ...

perhaps not even making up for the costs of trading. If the volatility is too high, all stops and exits will be hit too soon, wh ...

back period for the calculation will be a little longer than desirable for a short-term system. Remember, we strive to find a ma ...

imum holding period. This makes perfect sense in regard to the memory of the market. We’ll take a close look at this second vola ...

When reading surface charts, look for as many large, preferably uninterrupted, areas of the same color as possible, which repres ...

acteristics of the system, so that the very best values don’t fall on the very edge of the chart. If they do, there is no way of ...

risk–reward ratio, the greater the profit in relation to the uncertainty of the out- come, and the better off we are. In the cas ...

different value for the output variable for each test run (column E). How can that be? This is because these data are used to de ...