I started a comment to point out that keltner channel stops are the same as ATR stops.
But I did some digging first and realized / remembered that Keltner bands are based on an n*ATR distance away from the EMA, and not based on a distance away from price. It’s not the same, and it’s reasonable that Keltner stops would outperform ATR stops.
Time to rethink my appreciation for Keltner channels.
I would have to disagree with your analysis. An ATR TS is not based purely on the distance to the market when the TS is entered. Normally the ATR has 14 "look back periods" to choose from and the periods are also an average to the market price within a range. Not a simple multiplier of the current price. This article does not mention the ATR period used but one can assume its the 14 day one which is the most common. I have backtested ATR TS trading strategies on MT5 and can attest that most of the time the 14 period is not the most profitable one. For example: For ETH (crypto) I use period 4 on a 1 day time frame. For the Nasdaq (USTEC100) I use period 13 on a 4 hours time frame. These settings are not because I like them but because backtesting shoed that for these instruments they were the most profitable ones as per the MT5 "complex criterion max" and/or the profit factor.
Thanks for the followup, but I think there may be some confusion.
As you mention, the ATR trailing stop is "not a simple multiplier of the current price."
That is understood. In my comment I did not mention a multiplier of price.
I mentioned "n*ATR" as the distance from price. where n is the multiplier co-efficient applied to the ATR value, which (as you rightfully stated) can have a look back period of the trader's choosing.
One thing you may want to study is how algorithms come and take your stops. A very common algorithm is the “search and destroy “ algorithm You will see this very often in emini futures. The market will be going in your direction, it will suddenly reverse come and take your stop and then resume going in the right direction. Very aggravating eh? I see this a lot now in $SPY too since they introduced 0DTE options. The tighter your stop the more likely that algorithm will come and take it. This is because when you place your stop loss order you are broadcasting it to those algo bastards. Depending on your size it sometimes makes sense to place the stop as an “iceberg “ order if your broker offers this feature. Good article! Best of luck with your trading.
I really appreciate your thorough work. This article/project must have been a huge undertaking, involving a lot of organization and testing each method individually. I immediately backtested the code against my own strategy once I received it. Thanks again!
I would like to learn and understand more about your quantitative approach and view, but I am not formally trained in statistics. Would you please recommend one book as my starting point to begin learning?
I started a comment to point out that keltner channel stops are the same as ATR stops.
But I did some digging first and realized / remembered that Keltner bands are based on an n*ATR distance away from the EMA, and not based on a distance away from price. It’s not the same, and it’s reasonable that Keltner stops would outperform ATR stops.
Time to rethink my appreciation for Keltner channels.
Thanks for sharing.
I would have to disagree with your analysis. An ATR TS is not based purely on the distance to the market when the TS is entered. Normally the ATR has 14 "look back periods" to choose from and the periods are also an average to the market price within a range. Not a simple multiplier of the current price. This article does not mention the ATR period used but one can assume its the 14 day one which is the most common. I have backtested ATR TS trading strategies on MT5 and can attest that most of the time the 14 period is not the most profitable one. For example: For ETH (crypto) I use period 4 on a 1 day time frame. For the Nasdaq (USTEC100) I use period 13 on a 4 hours time frame. These settings are not because I like them but because backtesting shoed that for these instruments they were the most profitable ones as per the MT5 "complex criterion max" and/or the profit factor.
Thanks for the followup, but I think there may be some confusion.
As you mention, the ATR trailing stop is "not a simple multiplier of the current price."
That is understood. In my comment I did not mention a multiplier of price.
I mentioned "n*ATR" as the distance from price. where n is the multiplier co-efficient applied to the ATR value, which (as you rightfully stated) can have a look back period of the trader's choosing.
I hope this clears it up.
One thing you may want to study is how algorithms come and take your stops. A very common algorithm is the “search and destroy “ algorithm You will see this very often in emini futures. The market will be going in your direction, it will suddenly reverse come and take your stop and then resume going in the right direction. Very aggravating eh? I see this a lot now in $SPY too since they introduced 0DTE options. The tighter your stop the more likely that algorithm will come and take it. This is because when you place your stop loss order you are broadcasting it to those algo bastards. Depending on your size it sometimes makes sense to place the stop as an “iceberg “ order if your broker offers this feature. Good article! Best of luck with your trading.
I’m a subscriber. How do I access the information?
I really appreciate your thorough work. This article/project must have been a huge undertaking, involving a lot of organization and testing each method individually. I immediately backtested the code against my own strategy once I received it. Thanks again!
So what does that pic of a nude woman have to do with stop losses? Who you spend your money on? Join the club.
I was going for a goddess gifting you a divine shield to protect you against the markets, but sure your interpretation works too lol.
Well I am looking for one in a million.
So your interpretation works well also.
I would like to learn and understand more about your quantitative approach and view, but I am not formally trained in statistics. Would you please recommend one book as my starting point to begin learning?