Hey chirules54:
I hope you get this message after your exams and stuff (and I hope things went well)!!!
I just want to tell you that I've spent the better part of two days having another look at the Volatility System again. I tried a whole 'bunch' of things that would allow for more trades and smaller drawdowns by reducing the 'constant' value and I can tell you that (in my opinion) the best thing to do is to either LEAVE it at '3' as per the book (or even INCREASE it to the maximum of '3.1')!!! While this MAY sound VERY strange, only after you have tried to 'tweak' the damn thing and try and MAKE it do more trades, do you THEN realise that there is a very good reason for the value that he uses as a 'constant'. I've been trying it today on the 1 hour chart and with a smaller 'constant' (derived by using various 'Dale methods') things APPEAR to be working UNTIL you start getting into a range and then you've had it i.e. you're stopping and reversing all the time which of course is costing you money. I've now changed the value back (or to) '3.1' and so far it's made it through the Fed's rate announcement and kept me in right direction without 'whipsawing' me out and I have a feeling that it's going to continue to do so. If you look at it on the daily chart it would APPEAR that you're NEVER going to do a trade using it BUT take a look back a few weeks or months and see where you would have opened a position BACK THEN and THEN SEE just how well you'd be doing at this point. As an example: the system would have got you in last year long of EUR/USD probably somewhere around 5 September 2007 or so at around 1.3725. As I type the price is 1.5687. You would have gone from 1.3725 to 1.5687 WITHOUT ONE SINGLE WHIPSAW right up until now. That by my calculation is 1962 pips in 7 months. At GCI or Delta on a 'mini' lot that would be $1962 profit i.e. not bad for a layout of around $50!!! It would appear (and quite rightly so because this is what he states in the book) that this system WILL keep in going in the direction of the LONG TERM trend 'forever and a day' (that's MY interpretation not his)!!! Make sense??? It's obviously not something that can be reliably used for day trading (although if you used the same LOGIC on a short timeframe it SHOULD still work). As I suspected though: if you even THINK abou' overtrading your account with this system it will clean you out i.e. LOADS of free margin required (which AGAIN is unfortuanately something that not many of us have)!!!
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