by BlueBloodedTrader » Tue Aug 02, 2011 7:40 am
STRATEGY UPDATE REQUEST
This strategy is really quite good but could be improved further with minimal work.
FIRST IMPROVEMENT
The trailing stop limit is useful. What is needed now is the addition of a trailing profit limit. This would work in exactly the same way as the trailing stop limit but simply in reverse. It would be useful where a market doesn't breakout cleanly but instead oscilates around the breakout level. In essence, where a market is undecided about direction it is far better to have a mechanism that tightens both the stop and profit limits in order to improve chances of success.
The trailing profit will have no impact on the clean breakouts which will still max out.
This will improve the win ratio enormously.
Would you kindly add this to the strategy?
SECOND IMPROVEMENT
This strategy works very well for hard trending markets but very badly for rangebound markets that don't "breakout" very well. In fact, for such markets, this strategy consistently loses money, which presents a fantastic opportunity.
If you are able to introduce a user preference in the strategy that allows the strategy to be "reversed" then the strategy could be applied to range bound markets profitably.
So if the "reverse" preference is elected by the user, the strategy would enter a buy trade on the break of the lower channel (instead of a sell trade) and it would enter a sell trade on the break of the upper channel (instead of a buy trade). The profit and loss limits would also need to be reversed accordingly.
The trailing profit described above would then function exactly as the trailing stop now functions....but creating lots of small winners every time there is a failed breakout in a rangebound market.
Thank you for your help with this.