Spreadsheet Calculations:

From 30 days data collect daily hi - daily low. Take 10 day average of this difference. Take average of last

3 ,10 day averages. This is the width of our channel. Now, we want to try and capture

30% of this range. So, for longs our sell price is fixed at 35% of channel width below

the 2 day ema of highs. We call this the distance where we will sell to top of channel Delta.

We do not try to sell at the top ( we are trying for small steady, easily filled profits). Now, we know the approx. best price to sell at if we go long. We now try and find the highest price we are going to pay for this stock that we are going to sell. Our studies have shown we want an expectancy of between .8 and 1 for each suggested trade. Eventually this will work out to about .19 to .2 expectancy per trade for the system (65 -88% win rate). A .19 expectancy per trade with one trade per day on average, will produce a 100 % annual return on equity.

So we work backward, we plug in our stop, what we want our expectancy to be, and arrive at the price we are willing to pay. If our stock is not willing to do that for us we don't want it, we have 3 more stocks just waiting to give us a good price.

We put in our buy/limit order and wait.... If we get filled automatically at some time in the day we put in our protective GTC stop. Then we put in our sell LIMIT order at our precalculated best sell price. If the next day we go through our routine, and price has not gone in our favor we again analyze long/short. If we are on the wrong side of this trade we exit gracefully again at a good price...the delta for that day.

Notice that it does not matter if we are long or short. We will always try for 30% of the Bull/Bear channel. We always require a minimum risk/reward (expectancy). But, we are trying for an extremely high win rate. This does several things for us. It is good psychologically. We immediately know if something is wrong with our system if it drops below say 65% wins and can stop and fix it. So, we do care a little if we are long or short. We want really good odds on our side. So we only play the channel in the direction of the trend or a strong reversal signal which is in our intended direction. In the case of non-trending, we do use oversold, overbought stochastic readings to decide. (Stochastics 4,3,2)

We now have our ideal buy price, and our stop. But we need to check a few things. Our ideal buy price might be way below yesterday's low. Meaning if we get filled at that price we probably don't want it.

Experience has shown that in a trending market we can safely ask for 50% of the channel. So for this condition we modify our delta and calculations.

We have spreadsheets that generate (prints out for use to order by) a daily order sheet that contains our 4 stocks, long/short, stop, buy limit orders, sell (target) limit orders. Gap up invalid signals and gap down invalid signals. If the market changes in such a way that it profoundly effects our 2 day ema calculations we can readjust on the fly with our "quik calc" portion of the spreadsheet. It quickly makes decisions on position size, expectancy, and target prices based upon a sudden ema change.

Call up the charts and decide if our basic direction is long or short. We use the same decision tree each time to make this decision. It is condensed down into indicator "cheat sheet" which look at emas, macd-h, and stochastic.

Really what we would like is for the darn channel to stay nice and horzontal, and really wide. But of course this is the real world. So we have to adjust "ourselves" to the movements of the channel. This is done more or less automatically by our ema calculations. But the problem is sometimes we will get an unexpected move away from the way we have gotten used to.

It is for this we have a reversal danger checklist This is not a totally mechanical system. You have to look at the charts, be constrained by our indicator checklist, and see the obvious if it is there.

The system can appear to be complicated, intricate, and difficult to understand. It seems to have many parts. Lots of calculations, decision diagrams, rules, etc. This was not the design intent. The intent was for it to be simple, robust, and safe. Really, what we have here is a lot of work "under the hood". Like a car, alot goes into designing and building it. But driving it is a different matter.

Just as a car, we can learn to drive this system very quickly without having to consider everything that is beneath the hood. We said, "2 hours a day" to run it. This is very realistic based on experience. We fill in our spreadsheet for each of our 4 toolbox stocks (instruments). We decide to be long or short by looking at their graphs and referring to our cheatsheets. Then we enter using our entry form while referring to our entry rules. That's it! Just do it over and over.

A note about commissions and slippage: We neglected commissions during this initial testing phase. We use Interactive Brokers, and their commissions were deemed low enough to neglect for now. We could subtract them as a lump sum at the end of the year. In our case 22 trades per month x 12 x $2.00 per trip (for our small amounts). ($528). Maybe 10% of equity per year. Slippage is greatly minimized because the system uses limits to get in, and limits to get out. This is a very attractive aspect of the system. Stops can still have slippage.

The system expectancy has ranged from .14 to .35 reward vs risk PER TRADE. This is equivalent to 73% to 184% per year return on equity. (If a higher return than this is needed, more stocks can be added to the toolbox.) While this is not rigorously scientific,it certainly looks promising. The operator of the system (me), has on several occasions crashed the car. He did not follow the rules, or he changed the rules in midstream! These were from either a discipline problem or the fact that the driver was also the designer. The designer would keep on designing while the driver was trying to drive!

The best the system ever did was 88% win rate the worst was 64%. It is designed to be very safe. #1 thing was not to lose money and to know when it was broken.