EasyLanguage for Range Variable Stop Loss with Max Risk - Adjusting for Volatility
In this video, we show you how to adjust exits for an existing strategy without having to change the original strategy.
The goal is to find the find an adaptive way to adjust for volatility while capping our risk at a dollar amount per contract.
We don't want to scale infinitely if volatility spikes beyond its historic highs or norms.
We discuss the results with the following exits which we track in our Portfolio Calculator:
1.) $600 Stop Loss
2.) $1200 Stop Loss
3.) $2000 Stop Loss
4.) $600 Stop Loss with Range Filter
and then discuss these additional exits:
1.) Step Function Stop Loss using a $600 stop loss if Average Range is less than $1000 and a $1200 stop loss if the Average Range is greater than $1000
2.) A Variable Range stop loss without a max loss limit
3.) A Variable Range stop loss with a max loss limit
The Variable Range stop loss without a max loss limit can have a largest losing trade of $2,395. When we look at the Trade Graphs in Tradestation and the chart of Maximum Adverse Excursion, we see there is only one winning trade that had more than a $1400 loss while there were a large number of trades that exceeded $1400. This is the number that can be chosen for max loss limits.
If your capital is limited and a $1400 stop loss is too high, micros can be traded.
In the end, the strategy with $600 stop loss with the Range Filter is the most conservative with the smallest drawdown. It only has two trades in 2022 and may not trade if the current market conditions are the new normal.
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