Trailing stop-loss on basic ATR
under review
Dmitry
The main problem with conventional trailing is that due to the fact that an asset moves in waves, the stop loss gradually pulls up to the current price and is eventually knocked out by a squeeze or even just after a while, with another minor correction.
In my opinion, it would be convenient if trailing was automatically recalculated based on the asset's volatility, rather than just a percentage distance from the current price.
The options that could be managed are:
- Multiplier
- The range of candlesticks to count as ATR
- Updating the stop loss level when the candle closes in the selected timeframe
It is considered simple; Tradingview has many stop loss implementations on ATR.
Max IV
it would be great to have a feature like this.
Finandy Exchange
marked this post as
under review
Please describe in full how it should work with formulas.
Dmitry
Finandy Exchange:
When calculating the indicator, Wilder started by determining the True Range (TR), which is calculated as a maximum of the following three values:
- the difference between the current maximum and minimum;
- the difference between the current maximum and the previous closing price (absolute value);
- the difference between the current low and the previous closing price (absolute value).
tRT = max {High t - Low t; | High t - Close t-1|; |Close t-1 - Low t|}
The absolute value is used to ensure positive values because we are interested in the distance between two points, not in the direction of price movements.
Based on this indicator, ATR is already calculated. It has only one parameter, which is the N period. The default is a 14-period indicator, but you can customize it to suit your own strategy. This is what the formula looks like (it's a form of exponential moving average)
ATR t = ((ATR t-1 x (N-1)) + TR t)/N
To calculate the stop loss:
Multiply the obtained ATR by a configurable multiplier, and in the case of:
- Long subtract the obtained value from close at the time the candle was closed
- Short add the obtained value to close at the time the candle was closed
You can see how it looks on the chart on TradingView. The standard indicator is called Volatility Stop
Dmitry
Finandy Exchange:
Working with the stop loss installation might look like this:
Select the new Volatility stop-loss section in SLX in the “Trailing Mode”
- Set the 'multiplier' parameter
- Set the “period” parameter
- We choose a timeframe as a trigger for recalculating the stop loss. For example, at 4H, the stop loss will be recalculated and set every time the 4H candle is closed.
When setting parameters, display stop changes on the chart.