HA Bars vs Actual Prices, Again

Here’s a chart of DOG done with Hollow Candles and marked as it should have been traded from the signals implicit in the chart.

Here’s that same chart done with HA bars where the previous markings are left in place.

If cuing off the signals implicit in the HA chart, our would-be trader would be getting in a day earlier, but out --at best-- one day later and more likely two.

Dozens of such examples can be found where the signaled entries and exits differ between the two, and not always with the same biases. Make of it what you will.

[Later] Some more marking up of those two types of charts when applied to the same tickers suggests a good-enough stop rule.

“Get out on the fourth bar.”

Sometimes, maybe a lot of times, that’s going to “leave money on the table”. But using a time-based stop, rather than a conventional price-based stop or an event-based stop, is an easy, no-brainer way to lock in profits and to minimize losses in the frantic, knee-jerk, trading range market we now find ourselves in. But don’t take my word for it. Run the backtests yourself.

Lastly, here’s an admittedly cherry-picked example of where a 4-day stop exactly nailed a good exit.

Follow-up.

Investors suck at knowing when to sell, never mind almost never wanting to sell and --worse-- almost never selling when they should have. But as the late head of our War Department used to say, “You go to war with the army you have, not the army you’d like to have.”

We humans --as has been demonstrated in multiple studies-- give more emotional weight to losses than to gains, but don’t act on those emotions in rational ways. Hence, we tend to panic sell out of our wining trades, but to hold onto our losing ones. A time-stop --of whatever length that backtesting shows is appropriate to whatever one is trying to trade-- enforces a sell discipline.

If the back half of one’s trade is a no-brainer, then more effort can be given to the front half, which is exactly what people are inclined to do anyway. "Tell me what to buy they say. Not ,“Tell me what to sell”

Also, from what I’m seeing, an entry system based on HA bars is plenty good enough, especially when paired with a 3-period MATRI and maybe some eye candy of the TTM Squeeze.

Note: This is a “grinder’s” system’, not a “wildcatter’s.” There will never be huge profits nor home runs from any single position, nor a group of them. Instead, it’s a system meant to grind out single base hits across a wide variety of tradables and market conditions.

You’ve all seen the movie, Money Ball, right? When the manager is deciding which players to buy for the upcoming season, what reason does he give for wanting to buy to buy them? “The player gets on base.” If your trading system can get you “on base”, it might be just good enough.