Whenever you get hit, you are very upset emotionally. Most traders try to make it back immediately; they try to play bigger. Whenever you try to get all your losses back at once, you are most often doomed to fail.
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4% Rule

Formula for: MetaStock

indicator

Views: 2194

Added: May 29, 2008

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Tags: MetaStock, indicator

Q: Is it possible to write the "4% Rule" intoa custom formula?

A: The "4% Rule", popularized by Martin Zweig, among others, states that you enter the market after it has gone UP 4%, and exit the market after it has gone DOWN 4%. This counter-intuitive rule is intended to get you into (or out of) the big price moves. This is a good strategy for a strongly-trending market, but a poor strategy for a sideways market.

The following formula uses the PREV function and is slow to calculate onlarge amounts of data. The formula returns +1 in buy mode, -1 in sellmode, and 0 before there is a signal.

Code:

4% Rule
If(PREV = 1,
If(CLOSE < HighestSince(1,PREV <> 1,CLOSE)*.96,
-1,PREV),
If(PREV = -1, If(CLOSE>LowestSince(1,PREV <> -1,CLOSE)*1.04,
+1,PREV),
If(PREV = 0, If(CLOSE>Lowest(CLOSE)*1.04,
+1,
If(CLOSE -1,
PREV)),PREV)))

Code to difficult? Find somebody to help you with coding here.

Author: Martin Zweig
Source: http://www.DeBry.com

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