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kenvbtx
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Thank you for your answer. The all-time high statement did confuse me. So now I'm going to try to do some math here. Let's say GE is at $20. ATR is $0.80. $0.80 x 10 = $8.00 Trailing Stop = 30% of $8.00 = $2.40; $20.00 - $2.40 = ($17.60) Did I calculate the trailing stop correctly?
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Thank you for your answer. The all-time high statement did confuse me. So now I'm going to try to do some math here. Let's say GE is at $20. ATR is $0.80. $0.80 x 10 = $8.00 Trailing stop = 30% of $8.00 = $2.40; $20.00 - $2.40 = ($17.60) Did I calculate the trailing stop correctly? *second submit reply, guess the first one didn't go through I suppose*
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Thank you for your answer. The all-time high statement did confuse me. So now I'm going to try do some math here. Let's say GE is at $20. ATR is $0.80. $0.80 x 10 = $8.00 Trailing Stop = 30% of $8.00 = $2.40; $20.00 - $2.40 = ($17.60) Did I calculate the trailing stop correctly?
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I copied this page from the book. I underlined a few sentences, the part i don't understand, and was wondering if any of you can help me out on this. Thanks. - Kim On page 133-134. Trend Following works on stocks, too, and who better to teach us than two guys who wrote a paper called, "Does Trend Following Work On Stocks?". It outline their strategy. They use a 10 ATR stop. ATR stand for "average true range". The true range is simply how far a stock moves in a given day, like standard deviation, but it includes the gaps---if a stocks gaps up or gaps down. So for General Electric (NYSE:GE), it's average true range might be $0.80 right now. That is the typical daily move, including the gap. So they multiply the ATR by 10 and trail that from the purchase price, which is the all-time high. Their stops on average are about 28 to 30 percent away for a typical stock. For a really volatile stock, it might be 50 percent away. For a really quiet stock it might be as close as 10 or 12 percent. The average true range measures the volatility of the stock in question, so your trailing stops loss is adjusted according to each stock's volatility. That type of thinking, a counter-intuitive system---that's what you want.