In the case of the ATR method, the stop loss is relatively far away from the
entry price, which means that more trades are likely to get stopped out with a loss
because they’ve reached their maximum allowed trade length. These losses are
likely to fall somewhere between the entry price and the stop loss, but because we
don’t know exactly where, it is impossible—using only the information at hand—
to calculate the average loss and the average winner.
Anyhow, an average profit of 0.4 percent per trade with 45 percent profitable
trades for the ATR concept is better than 0.3 percent per trade with only 35 per-
cent profitable trade for the percent concept. The ATR concept also allows us to
go with two input values (the trade length and the profit target) that are placed
closer to the left-hand corner of each chart, which is where we want them to keep
the standard deviation of the returns as low as possible. The surface charts were
uninformative, so let’s move directly to Table 20.5 and compare it to Table 13.5.
Unfortunately, this system did not benefit much (if at all) from the stops. First, the
average profit per trade is slightly lower in Table 20.5 than in Table 13.5. This neg-
ative piece of news is also confirmed by both lower profit and risk factors, and a
lower standard deviation of the returns. The latter is also confirmed by a lower
number of profitable markets. The only positive is a good increase in the percent-
age of profitable trades.Trailing-stop Version
Moving on to the trailing-stop version of the system, Figures 20.16 to 20.18 pro-
vide a good illustration on how to use the surface charts when everything lines up242 PART 3 Stops, Filters, and Exits
Long only: 1.4 ATR stop loss,
2 ATR profit target, 6 bars max. trade length PercProf: 79.37
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 108.21 52.28 61,624.43 606.89 Market
St. Dev: 28.36 6.21 65,767.56 774.61 5,436.33 0.11
High: 136.57 58.50 127,391.99 1,381.49 6,043.21 Portfolio
Low: 79.84 46.07 (4,143.13) (167.72) (4,829.44) 0.78
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 1.36 0.15 43,035.37 28.14 14.82 5.82
St. Dev: 0.39 0.16 22,579.47 17.31 2.64 0.21
High: 1.76 0.32 65,614.83 45.44 17.46 6.03
Low: 0.97 (0.01) 20,455.90 10.83 12.18 5.61TABLE 20.5
Long Only Trade Length