Extraordinary Opportunities

Modified on 2010/01/12 19:17 by Eugene — Categorized as: PosSizers

This money management technique can be found in Tushar S. Chande's book "Beyond Technical Analysis". The idea is to increase trade size to capture outsized profits when there are occasional prolonged trends or violent market moves.

According to Chande, a bullish "extraordinary opportunity" is identified when the shoter-period SMA of closing prices crosses over the upper band, constructed by adding some percentage to the longer-period SMA of closing prices. The opposite defines a bearish "extraordinary opportunity".

The PosSizer also supports an alternative approach to determine extraordinary opportunities: taking it from the Position.SignalName property. In other words, your system determines whether the signal is a "regular" or "extraordinary", and the PosSizer just looks if the entry signal contains a keyword ("extraordinary" is expected by default), and sizes the trade accordingly. You can select one of the three Wealth-Lab's standard position sizing choices as the basis (fixed dollar, percent of equity, or max risk percent).

Note: you can either use the EntrySignal or Chande's method - not both at the same time.

The SMA periods, as well as % Deviation from the longer-term SMA, are configurable. Last but not least, "Increase trade size" determines the percentage change to the basis size.