ActiveTrader 2010-04 | Volatility scale in system by Eugene

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

Important:

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"