TSL for ENE

[David Morgan]

Hi All

ENE opened yesterday below it's B/O and then traded below the low of the previous 3 days.  Just before market close it hit it's B/O.

What is the correct TSL to use for ENE today?

Should the TSL be maintained at 4.17 (yesterday's TSL) or should it be reset to 4.00, which takes into account yesterdays low?

Regards

David

[Lee Power]

David

As you noted, ENE Opened at 4.21 and during the day fell to 4.01 which was through the previous TSL of 4.17  on 30/7/7 - eventually closing at 4.21, the same as Friday's low - plenty of whipsawing through the day

In some pretty volatile trading, you should have exited at 4.17 if possible even though it opened the next day at 4.25 if you were still on....it really depends on what you have in your trading plan.....I know it's difficult to exit a trade that's rising through a TSL but when that happens - and it is quite often in a volatile market such as we have, then I usually place trailing stops to get out as soon as it retracts.

Sometimes, it gaps through as what's probably happened is this case due to insufficient depth at your price - but my IMHO, I would exit ASAP and take the loss - get onto another as you never know what's going to happen. ???......good luck
Lee

[David Morgan]

Thanks Lee

I missed getting into ENE yesterday as the B/O was hit in the last minute of trading.  However I did get into it this morning at 4.29 and set the TSL for 4.17, which was hit shortly after.

What I was wanting to know is what are the Osprey rules for setting the TSL in this situation.  Is it correct to move the TSL to a lower price after the trade has opened?  I guess I am really asking, what is the Osprey research based on?

What type of TSL do you use in a volatile market?

Regards

David

[Lee Power]

David,

I think the best approach is to not get onto them to start with as they have already fallen through the TSL - so leave them for another day. If they jump back up through the original B/O then you can look at it as another entry, but as mentioned, if it has already fallen through the TSL during the day then there is a fair amount of whipsawing in the price to go with its volatility and I wouldn't go near it - look elsewhere as am sure there'll be heaps of others available so you don't end up with more stress and grey hairs. :o

I am not aware of any research into stocks that have given multiple B/O or TSL within a trading session other than they would be avoided due to their volatile behaviour.

Another way to view it - and please if anyone else reading can add then chip in by all means - you need to look at the original criteria that gave the B/O to start with and you will find essentially that that criteria is often no longer valid as the LLC count changes in the falling price i.e. per page 163 of the Osprey Manual.

You can calculate that on market close - or wait for the nightly download but I tend to place my stops at 4.05 pm with the data in front of me and then confirm them after the nightly download.

A critical factor in this type of market is to watch what is happening through the volumes available. Some of my Opsrey selections have small volume turnovers which make it difficult to get in with a worthwhile position size and sometimes even harder to get out of it it goes against you. - that's the problem we trade with in the ASE - the depth is a considerable factor.  :-\ 

The strength of Osprey is that you have definite entry and exit points calculated on the previous days price activity with HHC, LLC and LCC counts....unfortunately you can't extrapolate or move those values onto daily movements as you need the closing price for most of the calculation.

So basically Osprey will calculate the values for you and it's up to you to set your entries and exits based on what your trading system allows.

Hope that help...........Lee

[David Morgan]

Thanks Lee

I like your approach which requires making some judgement calls.  However with my limited experience I'm sure my calls would largely go against me.

In the Osprey Customer Bulletin - March 2007 Part 2, on page 2, it states that "the TSL is 1 cent below the lowest low of the previous 3 trading days, not the previous trading day".

In the case of ENE, which hit the B/O on 1/08/07 the TSL was 4.17 (i.e. the low on 30/07/08 minus 1 cent).  On the 2/08/07, according to the Customer Bulletin, the TSL should be set at 4.00.

Is this correct?  Perhaps  Gary might be able to clarify this?

Regards

David

[Lee Power]

That's correct David, also be aware that the new OB/OS indicator must be <= 2.618..... 
 
Easiest way I have found to check is to create an overlay Function screen in MM with appropriate lines at that level so you can see what's happening with the stock. It's then a matter of selecting the cursor with daily data in exploded view and calculating from the last 3 trading days..then again if the stocks selected are in your profile, MM will calculate automatically. 
 
There are other ways as well such as exporting the data to excel and using macros but as you stated being relatively new to Osprey - stick with the basics, it will become second nature after a short time. 
 
According to the research, and from what I have found since that update, is that there are far fewer trades but you tend to stay in the winning ones longer resulting in less of the situations you encountered with ENE. 
 
Unfortunately they do occur and it's something you have to set rules for in your trading plan and follow through for that "consistency"
 
As I don't trade the US, perhaps others can advise you on that market but would imagine it to be just as volatile as the local if not more so - then you have more depth to select.
 
All the best in your trading.................Lee