ActiveTrader 2010-04 | Volatility scale in system by Eugene

This strategy was featured in the April 2010 issue of Active Trader magazine.


For proper results, this system should be tested together with the "Pyramiding" PosSizer from MS123.PosSizers library.
Portfolio backtesting results obtained without the 'Pyramiding' PosSizer might be incorrect!

System Concept:

This system tests one of scale-entry techniques: the 'reverse pyramid' technique, or 'averaging up,' as Perry Kaufman referred to it in his book 'Trading Systems & Methods'.

Strategy rules:

1. Buy tomorrow's open when the 20-day exponential moving average (EMA) of closing prices crosses above the 50-day EMA of closing prices and the daily close is above the 200-day simple moving average (SMA) of closing prices.

2. Scale in by adding to the position every time prices advance three times the 10-day ATR above the last entry price. Limit the number of total positions in a stock to four (i.e., scale in no more than three times).

3. Exit the entire position at the close when the 20-day EMA of closing prices crosses below the 50-day EMA of closing prices.

4. Exit the whole position with a stop at six times the 10-period ATR if price goes against the most recently entered position.

Author: Eugene
Category: Breakouts
Creation Date: 2/25/2010
Licence: Freeware
Availability: Globally
Instructions for Script Download
  1. In Wealth-Lab client software, open the Strategy Explorer (Ctrl+O)
  2. Click the "Download..." button
  3. Click "Begin Download"
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