Way of the turtle


Moving Average Days Parameter


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Way of the turtle the secret methods of legendary traders PDFDrive

Moving Average Days Parameter
Figure 11-2 shows a graph of the values for the MAR ratio as the
number of days in the moving average, which defines the center of
the Bollinger band volatility channel, varies from 150 to 500.
Note how the results for the 350-day value are the peak for this
test. Any value that is less than 350 or greater than 350 results in a
test with a lower MAR ratio.
166

Way of the Turtle


MAR Ratio as Close Average (days) Varies
0.0
520
Close Average (days)
500
480
460
440
420
400
380
360
340
320
300
280
260
240
220
200
180
160
140
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Figure 11-2
Change in MAR Ratio as the Number of Days in the Moving Average Varies
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167



Figure 11-1 showed a graph of the values for the MAR ratio as
the exit threshold parameter varies. The exit threshold is a param-
eter that defines the point of exit. In the book’s earlier discussion
of the Bollinger Breakout system, the system exited when the close
crossed the moving average that defined the center of the channel.
In this test I wanted to see what would happen if the system exited
either before or after the crossover. For long trades a positive exit
threshold means the number of standard deviations above the mov-
ing average, and for short trades it means the number of standard
deviations below it. Negative values mean below the moving aver-
age for long trades and above the moving average for short trades.
A value of zero for this parameter is the same as the original sys-
tem, which exited at the moving average.
Consider what happens as the exit threshold varies from –1.5
to 1.0, as shown in Figure 11-3. Notice how the results for the
–0.8 value are the peak for this test. Any value that is less than
–0.8 or greater than –0.8 results in a test that shows a lower MAR
ratio.

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