Zulutrade - Range based stops by pair

Greetings from the land of Zulu.

As a follow-on to my post about stops a few weeks back, I took a look at daily ranges for the top-10 pairs on Zulutrade.

To find the top-10 pairs, I ran a query against my new MS-Access based database of Zulutrade history which has contains over 100,000 trades over about 400 providers. The plan is to update the data once a week after the close on Friday and see what intesting facts and trends that we can glean from the data.

Anyway, back to the issue of stops. I concluded in the other post that you need to look at the range of the pair. The table above shows the Average True Range (ATR) for the top-10 pairs. The second column is 1.5 time the ATR. The idea is that if your stop value is less than 1.5 times the ATR, you are likely to get stopped out based on nothing more than average daily movement.

To get these values, I used the free charting available at http://www.dailyfx.com/charts/. Select your pair, then switch to Daily time frame. Add the ATR study with a lookback of 14 bars. Click View, Information and you can see the latest ATR value as well as see its historical trend.

It makes sense to revisit these values about once a week. I read a while back that the legendary Turtle Traders were provided a printout of ATR values for each major commodity pair once a week on Mondays. The point is there a solid historical precedent for using ATR to determine stop values.

I currently use a fixed stop of 180-pips. Based on the table above, my stops are probably too tight for about half the pairs and just about right for the others. Zulu has a feature where you can set custom stop values by currency. I haven't gone as far as setting up custom stops by pair, but that's the next logical step.

That's all for now, have a great day.