SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Canadian Dollar
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Lorne Larson who wrote (10)10/10/1996 2:06:00 AM
From: Steve Wood   of 103
 
Lorne, My basic strategy is to initially risk about one standard deviation (based on my target time frame) and to be willing to give up about 1 1/4 std devs from the best price in my favor if indeed the price moves my way.

In the case of the DEC CD, I entered at 23.42. At that time the 64 day (three month) std. dev. was about .19 meaning I was willing and able to risk $190 per contract plus commission and slippage. As fortune would have it the DEC CD has closed as high as 74.15 with a std. dev. of .24. Note that as a result of the breakout, the std. dev. has increased. My stop is calculated as 1.2 * .24 = approx .29. 74.15 minus .29 is the magic number 73.86.

It is worthy of note that using this strategy this year with CD has resulted net loss because until now the CD has not been trending. If the present trend should hold for the next month or so, the year could yet be salvaged.

All that said, let me emphasize that there is nothing magic about these numbers. My trading is based on a belief that over time commodity prices resemble an unpredictable chaotic system with some trending tendencies. The bottom line is that any system which forces you to do the following has a better than average potential for profit.

1. Correctly guesses the direction of prices nearly 50% of the time. Betting on the trend has historically been a good choice.

2. Exit the trade before losses become substantial but without exiting potentially profitable trades due to "noise" in the prices. About one std. dev. statistically serves this purpose.

3. Allow favorable moves to run until there is a statistically significant reversal. My magic cookie for this is about 1.25 std. devs. from the best close.

4. Choose markets that are liquid and not prone to frequent gaps.

If you have the discipline to do all these things (much easier said than done) the number of losses will be about the same as the number of gains but the gains will be significantly larger than the losses.

Finally, in my experience, taking positions based on published news will result in the number of losses significantly exceeding the number of gains.

All of this is of course based on past experience and may have no bearing on what will happen in the future.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News