Compatible with all Metastock versions
Watch the video
Straiton & Partner
Traders tend to think that because trends always form in the markets, trend-following will always be a profitable style.
However, the net profit from trend–following has two main components: profit from trends minus loss from choppy market activity.
Usually, choppy markets cause trend-following methods to lose money. Therefore, it is not enough to have trends, it is also necessary that losses from choppy markets are not substantial.
The Elasticity trading system focuses on short-term market fluctuations and takes advantage of deviation or "elasticity" from the mean price.
One could visualize the action of a rubber band being stretched and at the moment where the expansion loses momentum, a contraction takes place, forcing movement in the opposite direction.
The Elasticity trading system opens a trade at the moment that deviation from the mean price loses momentum.
While most trend following strategies have a high loss to win ratio but in the long term generate positive returns, the psychological pressure on the user to abandon the strategy due to consistent small losses is immense.
The elasticity concept generates a relatively high win to loss ratio and therefore the user is less likely to abandon his trading plan.
Once positions have been opened, run a daily scan using the Elasticity Closing Positions exploration to check if long or short exit signals have been generated for your open trades.