Q. Are you able to provide some further background information on your systems and what they are trying to do?
A. The Altitude system is a much more medium term system looking to trade in well-established trends and providing those trends every opportunity to continue higher with reasonably loose trailing stops.
The Ignition system is a short term system which looks to trade within well-established trends however unlike the Altitude system, as soon as there is the slightest reversal, the tighter stop in Ignition will get you out.
In general terms, you may have a strong trend in a stock which lasts for 4 months. The Altitude system may only trade that stock once (and may even still be in the trade at the end of the 4 months), whereas the Ignition system may have traded that very same trend, but closer to 4 – 6 times.
Q. Which products do you think are best for your systems?
A. Simply, stocks for Altitude and almost anything for Ignition. I will first say that I don’t believe the Altitude system is suited to trading FX. It is a more medium term strategy based on established trends and those continuing.
Generally speaking, FX tends to operate in wide ranges … e.g. a stock might move from $1 now to $3 in the next 6 – 9 months, however a currency pair won’t do that. It will move to $1.30 (which would be a massive move) and then either settle or move back over time.
The Ignition System however is much better suited to FX and could be used on daily charts (assuming you have the patience and no desire for constant activity) or 4 hr or 1 hour charts for a little more activity.
I will add though, that whilst any system like mine is a great way of filtering out non-starters, I don’t necessarily believe that people should trade them blindly. The most obvious and common example for me are The ignition system will provide a setup but won’t alert you to a potential looming major resistance level that is highly likely to limit profit, for example. This is why I always say that MetaStock (and systems) are 90% of the setup (because they do so much number crunching) however the rest is vital and that is the human eye making a final judgement.
By the way, the other obvious and quite common scenario is a major reversal pattern forming at the time the entry signal is given. We have the intellect and judgement to step in and say no to the system. In other words, in my eyes, neither system is 100% mechanical however they do an extraordinary amount of work for us and make it far easier for us to be consistent.
Q. What is the recommended ATR stop loss for Altitude system?
A. On a daily chart, definitely not less than 2 x ATR. I used to use 3 ATR however in the last few years, I have pushed that out further. 5 x ATR is probably a little too much, so you can get some idea of the range I use.
Q. What is the recommended ATR stop loss for Ignition system? (I assume long and short stops are the same).
A. Following on from the comments above, I don’t use an ATR stop system with Ignition. If you are in a long trade, I prefer a stop just below the low of the previous period. Vice versa for a short trade.
Q. When would you use a percent stop loss instead of an ATR stop loss?
A. I personally haven’t used % stops for years, as I much prefer ATR. This is purely a personal choice and included in the add-on to allow people the option.
Q. Is there a recommended percent stop loss for Altitude system?
A. Following on from my previous response and based on the fact that I don’t personally use them, a good ‘rule of thumb’ is 10% for Altitude.
Q. Is there a recommended percent stop loss for Ignition system?
A. Nowhere near 10% like Altitude. As you are using a short term system, I believe a more technical stop is better like I mentioned earlier or a much smaller ATR multiple stop.
Q. Volume S in the Exploration Results – I am assuming that a higher number is better? Should the number also be above 100%? Does it make sense to sort based on this column?
A. I think a higher number is better. I also believe over 100% is better than 90%. What this indicator does is monitor recent volume (accompanying the recent move that generated the signal) and compares that with the average volume before then. We definitely don’t want to see a drop off of volume supporting the signal … we want the opposite. I don’t think sorting the stocks based on this column is necessary.
Q. Bracket – I understand the definition, but I am not sure what is a good range for a purchase. Is a higher number better or is it possibly too close to resistance? The example in the manual has stocks between 77 – 98. Is a higher number a better candidate for a purchase? A lower number?
A. This is purely based on your own preference. Probably least popular is my approach which is preferring stocks towards the top of the bracket (assuming a long trade), as most will wait for a pullback and then want to buy. I don’t mind where I buy as if the trade works out, I still want to be in the trade 6 months later meaning the slightly more I may have paid will result in being insignificant. The range for Altitude will be between 75% and 100% with a 100% reading meaning it closed at the 3 month high.
With regards to resistance … whilst any system like mine is a great way of filtering out non-starters, I don’t necessarily believe that people should trade them blindly. Therefore my Altitude system will provide a setup but won’t alert you to a potential looming major resistance level that is highly likely to limit profit, for example. This is why I always say that MetaStock (and systems) are 90% of the setup (because they do so much number crunching) however the rest is vital and that is the human eye making a final judgement.
Q. Vol % – If I use a 4 ATR trailing stop, I assume I would want to limit this to 2.5% or less. Any other suggestions?
A. I don’t think your use of a trailing ATR stop should influence your risk tolerance. The Vol% is doing just that … determining which are volatile stocks and which aren’t so bad. This again is a personal preference. For example, I don’t like touching stocks that routinely move 5% every day whereas others might love it. When I am using Altitude, I don’t mind if a stock is slow and steady due to the medium term nature of it.
Q. Another alternative is to open the charts for all the stocks in the results of the exploration and apply the Altitude template to these stocks. Does this make sense to do? If so, what type of things should I be looking for when I review the chart?
A. Absolutely … I firmly believe in the benefit of looking at charts. Perhaps do some sorting in the Explorer results beforehand, but please look at charts. Basic things to look at include strength of longer term trend, any likely problem areas of resistance (for long trades) or support (short), any recent or current reversal signals, clarity of up or down trend, and anything blatantly wrong with the chart that the exploration just couldn’t detect for some reason.
Q. The buy signal for Altitude can continue for multiple days. Is it better to purchase stock when the buy signal first appears? Or is it better to wait several days to see that the stock is advancing before purchasing the stock? Is there a maximum number of days after the initial buy signal where you would no longer buy it?
A. Again, due to the more medium term nature of Altitude, I don’t mind if the signal first occurred 1 day ago or 10 days. It doesn’t concern me at all. Some like to wait for confirmation and again like many things, this is a personal preference. My only other comment is that people can sometimes use ‘waiting for confirmation’ as an excuse to never enter, due to hesitation of ‘pulling the trigger’. This is just an observation of mine over time.
Q. Do you look at how long the trend ribbon has been green? If so, is a newer green trend ribbon better or worse than a trend ribbon that has been green for a while?
A. Absolutely yes, I consider it. Green for while means a well-established trend and this is my preference. A recently turned green may of course end up being a long term green but in the early stages, I think it presents a higher risk situation. This is perfect for some, but probably not my preferred style.
Q. Are there any hints in the Expert System commentary that could help me make the decision when comparing multiple stocks?
A. A similar answer to above, you can get some indication of how long the trend ribbon has been in place for. Other than that, the commentary provides good summary information of technical conditions that the exploration is scanning for, however more importantly it provides critical position sizing / risk management information.
Q. Do you look at fundamentals for these stocks in the exploration to help decide what to purchase?
A. I personally don’t look at fundamentals, but again this is a personal choice. I am not suggesting this is right or wrong … just my preference.
Q. Stocks – Do you have any suggestions for which stocks to include in an exploration for US traders? I think in one of the MetaStock videos you used the S&P 500. Is this a good list of stocks or do you have any other suggestions on how to come up with a list of stocks for the exploration?
A. I decide on a group of stocks based on risk. The majority of stocks within a major index will be reasonably stable, liquid and with low volatility. If you want to trade more speculative stocks with much greater risk, then that is your choice but Ignition may be better suited for that.
Q. Investor’s Business Daily (IBD) – IBD is a US paper that was founded by William O’Neil and has a list of 50 stocks that it updates based on things like earnings per share growth and price momentum. I am wondering if this list of stocks might be good for running explorations.
A. If you think fundamentals are important, then that list sounds like a great starting point. You can present a strong argument when both fundamentals and price are in alignment.
Q. Exchange Traded Funds (ETFs) – I also trade ETFs which primarily track various indices in the US such as large cap, small cap, value, growth, international, sectors, etc. I am wondering if the Altitude system could/should be used to trade ETFs or if I should only trade stocks with Altitude?
A. This is a personal choice and I have never traded ETFs with Altitude so I cannot specifically on it. As I always say to everyone, it is better to conduct some form of testing to validate a strategy – to prove or disprove it first.
Q. Mutual Funds – Mutual funds do not have volume information and I am assuming that I cannot trade mutual funds using Altitude?
Yes this will be a problem. Volume is a key criterion of Altitude and will reject your funds because of it. However you could still apply the template and read what the commentary has to say.
Q. Periodicity – when I look at the charts or run the exploration, I am doing it daily. Would the Altitude system work if I changed the exploration to weekly or looked at the weekly charts with the Altitude system? I am also wondering the same thing for the Ignition system which is more short-term. Could the exploration or the charts be looked at weekly for the Ignition system?
A. I have never ever used weekly charts therefore again, I cannot really comment on how effective Altitude may be looking at a time frame 5 times greater than daily charts.
Only because I understand the Ignition system quite well, and if you have the patience for it, then there is no reason why you cannot use Ignition on weekly charts. You would need to be very patient and be thinking much longer term.
Q. The templates do not give the arrow (buy / sell) along the trend as identified in the trend ribbon and as displayed in the video demo).
A. The Altitude or Ignition systems will not provide trade signals based on the trend ribbon alone. If you saw this in a video, then this was probably a coincidence. There are numerous other technical criterion that both systems are based on, however the trend ribbon is one of them. Therefore, if the trend ribbon changes colour from red to green, this doesn’t automatically mean there will be a buy signal given at the same time.
Q. When moving between time frames of the same template, the template appears to distort and lose the trend ribbon. It does not happen all the time but tried about 15 securities and it did occur on 5 of them.
A. With regards to the templates on different time periods, I can only suspect you may not have sufficient periods loaded in the chart for the trend ribbon to calculate its conditions. For example, the Altitude trend ribbon uses a 150 period simple moving average, and if you do not have 150 periods loaded, it physically cannot calculate the ribbon or display it on the chart. If you are able to send through some screen captures, I can take a closer look. This is only my assumption of what the problem could be. The outstanding support staff at MetaStock may be able to provide more insight.
Q. Do we wait for a buy arrow of can we just enter using the green trend ribbon indicating long position?
A. So with the Altitude System, the buy arrows do indicate when all conditions are met for the first time. You may have a lot of green ribbon, however that doesn’t mean all of the other conditions have been met. The trend ribbon is simply monitoring the longer term trend.
If you wish to enter when the green ribbon first appears, then you may do so however it is not what my system is designed to do. You will notice that no buy signals occur immediately after the green ribbon commences because there are a number of different conditions that must also be met.
Q. What is the stop loss mechanism we use in this system? Is it ATR again?
A. Whilst Ignition is also a trend following system, it is quite different to Altitude. In the manual I refer to which stops should be used with which system. Suffice to say the ATR stops are much more forgiving and liberal and are best used with Altitude, not Ignition.
The Ignition system demands much tighter stops due to it trying to take advantage of shorter moves, compared with Altitude.
Q. Can this Ignition system work successfully on an intraday timeframe (say 15 mins / 30 mins)?
A. I believe Ignition can be used on intra-day time frames however I think anything less than 30 mins is not very effective. This is more a general commentary on trading such short time frames and how I believe technical analysis becomes a lot less effective when you narrow your focus so much. I have said for many years to traders all around that world that I believe you have a better chance of making money at a casino than you do trading 1 minute charts.
Q. I am having problems with all four TLS stoploss indicators, when I input the date and percent or ATR and press ok I get an error message, “Value must be greater than 2,000.00. I have double checked that I have entered the inputs correctly, could you please help.
A: The error you are experiencing is caused by a simple issue. You will have to manually type in ‘2015’ or remove the comma and then all will be OK.
On another note, the indicators should use the same scale as the price. Please be mindful of this and if you see the 2 y-axis (left hand side and right) being different. In this situation, you will need to right mouse-click on the indicator, select ‘Scaling’ and select the appropriate option.