trade management strategies

8/9/2019 Trade Management Strategies

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Copyright (c) LBRGroup 2011. All Rights Reserved.1

Market Structure and Trade Management StrategiesFundraising for Christchurch NZ and Japan

June 14, 2011

Linda Raschke

LBRGroupco!


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Copyright (c) LBRGroup 2011. All Rights Reserved.2

There is a free 133 page manual you candownload that elaborates much more on

structure, swing trading, execution and market

psychology at: FutureathTrading!com

This power point presentation will be posted tolbrgroup!com for you to download on "ednesday!


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Copyright (c) LBRGroup 1996-2006. All Rights Reserved.

Fi"tered #a$es % Basic &heor'

(rthur )erri"", 1*++

! Arthur "errill#s $iltered %&ves used & perce't&ge o$ price ovee't(*) to $ilter out the 'oise. +is %or, %&s iport&'t ec&use hededic&ted & %hole oo, to the co'cept o$ cl&ssi$yi'g p&tter's y the%&ve structure.

! G&'' %&s pro&ly the ost popul&r predecessor o$ s%i'g ch&rti'g.

! elles ilder docue'ted the use o$ A/R (Aver&ge /rue R&'ge)$u'ctio's to u&'ti$y s%i'gs &s opposed to perce't $u'ctio's. /his%&s &pplied to & syste c&lled the ol&tility stop &'d reversesyste.

! "errill#s %or, %&s $&r ore coprehe'sive i' th&t 'ot o'ly did he

cl&ssi$y previous &r,et structures he &lso developed cl&ssic&ctu&ri&l t&les or pro&ility grids to e&sure the edi&' *i'cre&se3decre&se &'d dur&tio' o$ ull &'d e&r &r,ets.


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Copyright (c) LBRGroup 1996-2006. All Rights Reserved.4

)arket tructure as !easured -' .ings

&ves elii'&te 5'oise &'d thus &,e is e&sier to deteri'e /R78 Additio'&lly the &solute support &'d resist&'ce &re o'e ore %&yo$ &ddi'g structure. hile Art "errill used & perce't $u'ctio' %e use&' A/R $u'ctio'. A 'e% :p &ve st&rts %he' price oves A/Rs

up $ro the lo%est lo% or lo%est close over 1-period loo,-&c,. A'e% o%' %&ve st&rts %he' price oves A/R#s do%' $ro thehighest high or highest close over 1-period loo, &c, period.

;'ce &r,et s%i'gs h&ve ee' u&'ti$ied rel&tio'ships tur'i'g

poi'ts &'d tre'd c&' o'ce &g&i' e cl&ssi$ied cou'ted e


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)arket #a$es /efine tructure


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S index # wa$es define structure and trade opportunity! Some wa$e patterns lead to small wins, some ha$e

abo$e a$erage odds of a bigger win!


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BN % #a$e structure is one of the pri!ar' -asis of a trade


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&rend Re$ersa" in ugar


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Copyright (c) LBRGroup 1996-2011. All Rights Reserved. 11

Rising #edge . con$erging &rend"ines % Crude % p"a' for -ig .in or trai" stop


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B) % #eek"' chart sho.n c"ean structure &he higher

ti!e fra!es ha$e "ess noise


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B) % /ai"' Chart


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&rend Re$ersa" fro! up to do.n again % #eek"' chart


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ndicators -ased off a deri$ati$e of price can -e !is"eading tructure !ust

a".a's co!e FR& &hen the indicators can -e put in a conte3t


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#a$e tructure % /o""ar in an up trend


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#a$es structure sti"" sho.s uptrend


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ptrend sti"" intact, $o"ati"it' contracting


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&rend Re$ersa" /o.n .hen 5o.er Bu' fai"s


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p .a$es are no. shorting opportunities


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&he trend in 607'ear 'ie"ds re$ersed on the dai"' charts at the end of 2008

( fai"ed -ear f"ag is the sa!e as a fai"ure test or fai"ure s.ing &he -reakout


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( fai"ed -ear f"ag is the sa!e as a fai"ure test or fai"ure s.ing &he -reakout

fro! this e9ui"i-riu! point did not "ead to a -ig .in ( trai"ing stop !a' ha$e

sti"" "ed to a s!a"" .in

:i "d h t t " f ti i d t d / it th h


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:ie"d chart % e3tre!e e3a!p"e of reaction up in do.ntrend /espite the sharp

s.ing up, the .a$e structure for rates re!ained in a stead' do.ntrend in

2004


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Trailing Stop Functions

! ;8L? should e used &t speci$ic

structur&l poi'ts@

! Bre&,outs /re'd revers&ls &s de$i'ed y

the %&ve structure &'d &$ter

A-B-C $or&tio's i' & tre'di'g &r,et


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.eet spot .ith detai" on short ti!e fra!e


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&rend re$ersa" on hour"ies precedes trend re$ersa" on higher ti!e fra!e


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Co!parison of different structura" points % s!a"" target $ersus "arge target


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Japan nde3 % &rend re$ersa" is a 5rocess;


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1

Russe"" 2000 % #eek"' Chart


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Russe"" 2000 % /ai"' chart


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5 800 % #eek"' Chart


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/J ti"ities nde3 % #eek"' Chart


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Bra


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Bra


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#eek"' /o""ar nde3


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/o""ar nde3 % /ai"' Chart


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/o""ar nde3 % ?our"' Chart


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Go"d!an achs pot nde3 7 #eek"'


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4

Copper ntrada' % detai" of fai"ed ( B C


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#heat 7 /ai"'

h h " h


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#heat % hour"' chart


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' (asic atterns:

Simple continuation pattern )-u"" or -ear f"ag in a trend@A=nter .ith "i!it order or !arket order, p"a' for s!a"" .in 8 to18 (&R@, nitia" Risk 2 (&R &ighten stop .hen !arket

!o$es in 'our fa$or

*orrecti$e +(*A enter after 'ou see 'our stop point,5"a' for -ig .in !ore then 1 (&R@ or ne. highs or "o.s

nitia" RiskA 1 (&R fro! s.ing high or "o.

Failed +(* trend re$ersa"@A =nter on -u' or se"" stop,

p"a' for -ig .in or trai" stop nitia" RiskA 1 (&R (reakout from con$erging trendlines =nter .ith -u'

or se"" stop or !arket order, add on first conso"idation or

pause &rai" stop or p"a' for -ig .in nitia" RiskA 1(&R fro!

first entr'


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First F"ag after -reakout C(N p"a' for Big &arget


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Bear f"ags "ate in the s.ingA s!a"" target >NL:


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Correcti$e (7B C or 5o.er e"" in a do.ntrending !arket Note !o!entu!

!o$e after -reak fro! side.a's "ine 5"a' for ne. "o.s

i "" h i i h d i h


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Correcti$e ( B C or 5o.er e"" &he first is at the end of a s.ing &he

second co!es after a fresh -reak fro! a side.a's "ine


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Fai"ed (7B7C or trend re$ersa" point &rai" a stop


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Breakout fro! con$erging trend"ines .edge@A &rai" top

(unds-!acti$e rhythmic market with $olume! (reakout from con$erging


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y g g

trendlines and ower (uy )+(*.


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/(L: CR/= D>L(&L&: &>5


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=

/(L: CR/= % D>L(&L&: &>5


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/olatility Stops

! A/R Aver&ge /rue R&'ge

! A/R 3- highest high or lo%est lo% o$l&st 10 &rs

! A/R 3- ovi'g &ver&ge o$ close high orlo%.


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Testing for the 0dge

! R&'doly e'teri'g & positio' c&' produce & pro$it 6*o$ the tie. By &pplyi'g siple $ilters r&'do e'try c&'ecoe re&,eve' or eve' slightly pro$it&le.

! /his d&t& gives & e'ch&r, $or & syste&tic tr&der toe&t i' order e'sure the syste is success$ul due toore the' c&pit&lii'g o$$ 'oise. 58oise is &'&logous%ith r&'do price d&t&.

! Let#s go through & step e


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( profita-"e s'ste! that is dura-"e and ro-ust -ased off rando! entries;

! At this poi't %e ,'o% %e c&' r&'doly e'ter & tr&de &'d get etterthe' &' >0* %i' r&te o' ost &r,ets. By &ddi'g & tre'd $ilterr&'do e'tries c&' e &de i'to & pro$it&le syste.

! ;'ly lo'g e'tries &re t&,e' i' &' up tre'd &'d o'ly short e'tries &re

t&,e' i' & do%'tre'd. (Ag&i' &ll e'tries &re &t r&'doly ge'er&tedpoi'ts). /he Hro$it /&rget is 4 A/Rs &'d the Dtop Level is set to A/Rs (Fust outside o$ the 5'oise). /his e'sures th&t i$ %e c&' getetter the' & 0* %i' r&te the syste %ill e pro$it&le.

! /his syste %&s ru' 100 ties o' e&ch &r,et %ith r&'doly

ge'er&ted tr&de e'tries e&ch tie. /he tie period tested %&s $ro199 to 200 o' 22 doestic $utures &r,ets th&t i'cludedcurre'cies o'ds i'de< $utures et&ls &gricultur&l products &'dso$ts.


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Statistical profile of random system with one Trend Filter:

! /he syste %&s pro$it&le et%ee' 92 I 100* o$ thetie o' &ll &r,ets %ith the e


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u!!ar'A

! R&'do e'try produces & high %i'3loss r&te %he' the stop is l&rgee'ough to e Fust outside the 5'oise. By usi'g & tie stop %e c&'

&void t&,i'g repe&ted l&rge losses &t the e


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elationship between 0ntries, Stops, and rofits

! /here is 'ot &l%&ys & rel&tio'ship et%ee' & tr&de is

e'tered &'d %here & tr&de is stopped out.

I Kor e


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Momentum ri$en Models

! hile ol&tility &'d Ch&''el re&,out systes &re purely price drive'

oe'tu $u'ctio's &re &sed o' & deriv&tive o$ price. "oe'tu h&s&'y i'teresti'g properties i'cludi'g & le&di'g $u'ctio' $or price. /hetr&deo$$ is &' i'cre&se i' 5'oise over soothed $u'ctio's such &s ovi'g&ver&ges %hich h&ve & l&g. h&t is the est coi'&tio' o$ e


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+T )+$erage True ange. Stops

(a most important concept!)! A/R Aver&ge /rue R&'ge

! 5/rue R&'ge i'cludes 5g&p &re& &y#s

r&'ge! A/R is & ovi'g &ver&ge o$ the p&st 8-

d&ys 5/rue R&'ge.

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