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ATR棘轮止损指标ATR+Ratchet

ATR棘轮止损指标

A New Exit Strategy - The ATR Ratchet By Chuck LeBeau

Recently I've been doing quite a bit of research on new systems for stock trading. The research is on behalf of a new hedge fund that will be starting later this year. The fund will be managed by Tan LeBeau LLC, the company that funded this research project. After some serious internal discussion about the advantages of keeping this new exit strategy a company secret, the LLC has graciously given me permission to share this discovery with our System Traders Club members. Here is a bit of background on how the new exit strategy came about.

In the process of testing various exit strategies for our stock trading systems we found that we needed a profit-taking exit that performed somewhat along the lines of the Parabolic SAR but that could be made more flexible and easier to code and apply. We found that the Parabolic was hard to use because it was often on the opposite side of the market from our trades or it was starting from a point that was too low for what we wanted. After spending a great deal of time with the Parabolic we decided it was not helpful for the particular systems we were creating. As an alternative to the Parabolic exit we decided to test some new exit ideas based on my extensive work and experience with the Average True Range. After a great deal of tinkering and experimentation we were pleased to learn that the new exit strategy worked surprisingly well for profit taking and had many very useful features and applications. I decided to name this new exit strategy the "ATR Ratchet".

The basic idea is quite simple. We first pick a logical starting point and then add daily units of ATR to the starting point to produce a trailing stop that moves consistently higher while also adapting to changes in volatility. The advantage of this strategy over the original Parabolic based exit is that when using the ATR Ratchet we have much more control of the starting point and the acceleration. We also found that the ATR based exit has a fast and appropriate reaction to changes in volatility that will enable us to lock in more profit than most conventional trailing exits.

Here is an example of the strategy: After the trade has reached a profit target of at least one ATR or more, we pick a recent low point (such as the lowest low of the last ten days). Then we add some small daily unit of ATR (0.05 ATR for example) to that low point for each day in the trade. If we have been in the trade for 15 days we would multiply 0.05 ATRs by 15 days and add the resulting 0.75 ATRs to the starting point. After 20 days in the trade we would now be adding 1.0 ATRs (.05 times 20) to the lowest low of the last ten days. The ATR Ratchet is very simple in its logic but you will quickly discover that there are lots of moving parts that perform a lot of interesting and useful functions; much more than we expected.

We particularly like this strategy because, unlike the Parabolic, the ATR Ratchet can easily be implemented any time we want during the trade. We can start implementing the stop the very first day of the trade or we can wait until some specific event prompts us to implement a profit-taking exit. I would suggest waiting to use the exit until some