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2019issue C0732-37

Trend systems need a no-trade rule

The archive treats staying out as part of the same trend-following procedure that grants entry and forces exit. Risk limits are set first so that procedure can also refuse a session.

  • Abstention belongs inside the same trend-following procedure that grants entry and forces exit.
  • Five fixed risk limits are treated as mandatory so a trader stays solvent enough to take later setups.
  • ATR position sizing bounds the loss before a position is held, then ATR channels, support, resistance, and trailing stops keep that bound in force.
  • Once those risk rules are in force, the strategy decides entry and exit, and agreement with the market is treated as irrelevant.
Entries in this reading3 entries
Current trackATR position sizing43 readingsTrading psychology process59 readingsTrend following93 readings

Psychology after technique runs out

The archive frames market activity as applied mass psychology. A trader's own psychology meets crowd behavior after purely technical solutions run out.

The foundation of that activity is described as a strategy with backtested results that the trader can stand behind. Entries and exits are said to be triggered by technical signals, while technical analysis is framed as a historical mathematical measure of a live emotional event that need not repeat.

Size the allowed loss first

Capital preservation is placed ahead of opportunity, because a trader who is out of cash cannot take later setups. Five fixed risk limits are presented as mandatory rules whose purpose is to keep the trader solvent enough to remain in the game.

Once those risk rules are in force, the strategy decides entry and exit. Agreement or disagreement with the current market is treated as irrelevant.

ATR position sizing is how that bound is placed on the book. Average-true-range channels mark when price is outside typical movement, and ATR-based support, resistance, and trailing stops bound trend-following positions.

A lag-oriented style uses a wider stop and a smaller size so more drawdown can be absorbed. A tighter-stop style uses larger size and accepts more frequent reentries.

One procedure can also stay out

The speaker describes a conservative, primarily weekly trend-following stance that, once a position is established, mainly requires a daily check.

Abstention is treated as part of the same trend-following procedure. During a selloff the described approach stays out until the market shows direction.

Editorial interpretation: the trading psychology process is the shared procedure that can grant entry, force exit, or withhold permission. Staying out is not a separate mood layered on after the system is written.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
34 of 36 in the ATR position sizing track
202060-61 pp.Next on ATR position sizingAverage true range as a shared unit for size, pairs, and stopsAverage true range is an unbounded, instrument-specific reading of typical movement, used for risk planning and profit objectives rather than as a leading or lagging oscillator.
All readings on this track · 36 readings
  1. 1988Constructing unsigned true range for directional models
  2. 1989Evaluate an always-in ATR breakout as one procedure
  3. 1992Variable lookback and average true range as a trend-filter construction
  4. 1993A random-walk index that uses true range as its scale
  5. 1993A shared harness for trend-filter construction
  6. 1998Finish a trend with a volatility trail, wave permission, and a slower-frame veto
  7. 1999A trend filter that switches tactics and scales ATR targets
  8. 2001Filter higher lows with linear regression, then judge the exit
  9. 2003A Mechanical trading system is a maintained procedure, not only an entry trigger
  10. 2005Construction of a volatility-bounded long entry
  11. 2005Six-zone encoding of open, high, low, and close
  12. 2006Normalized average true range as a pre-entry volatility bound
  13. 2006Chandelier exits, ATR position sizing, and trailing stops
  14. 2007Constructing a rule-based entry with Relative Strength Index and ATR position sizing
  15. 2008Constructing a zero-lag TMA and heikin-ashi crossover as a complete rule set
  16. 2010Use the session-range percent stop as a pre-trade filter
  17. 2011OCA exit groups, trailing limits, and ATR stops
  18. 2011ATR bands around support and resistance for stops and targets
  19. 2013Algorithmic head-and-shoulders construction with bounded exits
  20. 2013Constructing ATR-scaled swing pivots and linear-regression divergence
  21. 2013Constructing volatility bands from typical price
  22. 2014Constructing true-range contraction filters before expansion
  23. 2015Constructing touch plans from modified true range
  24. 2015One checklist for breakout entry and ATR risk
  25. 2015Percentage true-range construction for cross-market volatility filters
  26. 2015Construct a percentage true range for cross-market volatility
  27. 2015Percentage true range as a pre-entry exposure filter
  28. 2016Constructing ATR-filtered breakout entries
  29. 2017A dividend date as a pairs-trading classroom
  30. 2018Range-based volatility as a true-range construction
  31. 2018Moving average support and volatility-band construction
  32. 2018Construct a lifecycle breakout from compression
  33. 2018Pair the book first and let volatility or range set the size
  34. 2019Trend systems need a no-trade rule
  35. 2020Average true range as a shared unit for size, pairs, and stops
  36. 2020Volatility sizing and target-risk leverage as a pre-trade gate
By fieldDecision process78 readingsBy year201981 readings
All 43 readings tagged ATR position sizing
Also on ATR position sizing5 readings
1989A close-only volatility reverse bound to average true range1998Finish a trend with a volatility trail, wave permission, and a slower-frame veto1984Critiquing reward bias, single-scale charts, and exact-turn forecastsTrading psychology process1988Constructing unsigned true range for directional models1989Evaluate an always-in ATR breakout as one procedure