This system trades both sides of the market the same way, thus short trades
made during a prolonged uptrend will probably not fare as well as those made
from the long side. However, the counter to this is that when the long-term trend
is down, as it has been the last couple of years, the system is well prepared to prof-
it from the short side.Suggested Markets
Stocks, stock-index futures, and stock-index shares.Rules
Go long tomorrow on the open if a) today’s close is below both yesterday’s close and
the close of the previous week, b) yesterday’s close is below the previous day’s close
and, c) the close of the previous week is below the close of the week before that.
Exit first half of position with a loss if the trade goes against you by 1 percent.
Exit first half of position with a profit if the trade goes your way by 4 percent.
Exit second half with a profit or loss if the trade moves 1.6 percent away
from your maximum open profit (i.e., trail a stop 1.6 percent below the high of the
trade).
Exit second half with a profit if the trade goes your way by 4.5 percent.
Exit the entire position after eight days in the trade.
Reverse the rules for short trades.Money Management
Risk 2.5 percent of available equity per stock. The number of shares to trade (ST)
is determined by the following formula:
ST AC * PR / TR
Where:
AC Available capital
PR Percent risked (fictive fin the rest of the book)
TR Four times the true range for the day preceding the entryTest Period
January 1993 to July 2002.376 PART 4 Money Management