Research Overview | Relative Minimum Stops | Tradability Index | Candle Predictor | Mechanical Systems

Relative Minimum Stop

The Relative Minimum Stop is designed to establish an initial stop at the recent "pivot point", below a Long or above a Short entry point.  The Stop also trails price to establish a wide trailing stop, which tends to maximize profits on the move.

This chart illustrates the idea of a Relative Minimum Stop - Notice how well the 
move was captured by successively lower levels.

Abstract:

The concept of Relative MInimum Stop (RMS) establishes a stop based on the relative mimima (or maxima) from an entry point.  This was done to create an initial stop for ARM2 and other systems which fire relatively close to primary reversal points.  Our goal in all Exit Research is to create exits that yield profitable trading results.  RMS appears to be in the right direction.

Many articles in technical analysis literature, including some by Larry Williams, establish the fact that wider stops generate higher profits.  The problem with wide stops is they provide too much draw down. Maximum Adverse Excursion is too high.  What would be nice is an initial stop that does not give up too much on an adverse move, with an additional trailing stop that allows maximum breathing room for the trade once it moves away from this point.  The Relative Minimum Stop provides both of these.  It works so well, some members have decided this is the only stop they want to use, for medium and long term trades. 

Examples

Here is May Department Stores, with Tradability Index applied (this example also shows another research project, Relative Minimum Stop).  You can see that when the TI is below the 30 line, that the chart behaves in an erratic way and is therefore more difficult to trade.  Values well above 30 indicate a smooth chart, with more tradable moves and swings.

This chart shows three entries and exits on MWD.  Each did a very good job of capturing the ultimate move, thanks to Relative Minimum Stop.   Signals were fired from Valid Trend Lines in ARM2.

Another chart for AT & T.  Note how RMS kept us in this fairly volatile stock in both trades.

Performance of RMS

Relative Minimum Stop is an Exit which which must be applied to a profile.  Current test runs combining RMS, ARM2 and the Tradability Index are showing positive, mechanical trading results.  See First 100% Mechanical System Released.   

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