tag:blogger.com,1999:blog-3834975359889311403.post3884405664186331426..comments2023-02-27T05:45:40.054-08:00Comments on Tim Bovee, Private Trader: A tale of two rollsUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3834975359889311403.post-59107207059730284612013-06-11T12:33:41.748-07:002013-06-11T12:33:41.748-07:00Kurt, Thanks for the question.
At very high or v...Kurt, Thanks for the question. <br /><br />At very high or very low prices, the ATR sizing method does break down. It is derived from the original Turtle Trading method of the 1980s and was a simple way to make the calculation back in the days when computing power was somewhat less ubiquitous. I'm considering replacing it in my rules by either the beta or a combination of implied volatility on optionable sotcks and beta on the others, but I need to do some testing before making a decision.<br /><br />One way around the problem with high-priced stocks is to trade option spreads instead. I trade short vertical spreads typically and determine the unit size by dividing the maximum loss on the spread by the ATR. Since options are leveraged, the unit size will work out at levels where the stock price is too high to trade. However, that won't work with a price as high as AAPL's.<br /><br />My second method is to treat my single entry transaction as four units, the maximum I allow myself, and to forego adding to the position if the it moves in my direction. That means I can do a trade that's four times riskier than the rules would allow.<br /><br />My third method is to, well, cheat. If I like a stock a lot and the best I can do on the unit is 0.45, then I'll cross my fingers and open the position. I really don't like to break sizing rules, but ultimately, I hate losing an opportunity even more.<br /><br />Good luck with your trading!<br /><br />Timhttps://www.blogger.com/profile/12378082044669527388noreply@blogger.comtag:blogger.com,1999:blog-3834975359889311403.post-89385345985266636512013-06-11T11:44:19.227-07:002013-06-11T11:44:19.227-07:00Tim, I have a question about your position size. ...Tim, I have a question about your position size. If you have $100,000 then 1 unit = $1,000. However, it says to divide by the ATR. APPL has an ATR of $11, so you would be talking a position of about $90, which doesn't make sense. On something like BAC, it would be $.33 so that would be $3,000.<br /><br />What am I missing?Kurthttps://www.blogger.com/profile/03827718885466021882noreply@blogger.com