What Is Jimberg AFL?
This can be a description of the volatility based totally trading system developed via Jim Berg. Jim is an skilled trader and his way caught the eye of many individuals when he used it to win the Non-public Investor Journal trading competitors in 2002, a tough yr within the Australian market. All the way through that 12 months the market declined by using about 20% however Jim managed to provide a return of some 30%, an enormous out-efficiency of the market. Jimberg AFL is Jim’s work coded in Amibroker formula laungage. At the end of post I will share Jimberg AFL free for you that you can use for your trading.
In his system he makes use of the volatility indicator 2ATR(10) for the entry signal in addition to the trailing cease and likewise makes use of it to provide a revenue taker line on the chart to point when costs have moved up all of sudden. This is a signal to take income earlier than a that you can imagine retracement to extra commonplace value actions. The system is ready up for lengthy trades most effective, so primarily appropriate for swing trading.
The system is described in “Shares and Commodities” journal February 2005 problem in a piece of writing referred to as “The Actuality About Volatility” via Jim Berg. On this article the coding for Metastock is given. This has been recoded for AmiBroker by means of Thomasz Janeczko, the originator of AmiBroker. It may be discovered on the AmiBroker web page however to get entry to it you want to have sold AmiBroker on the grounds that it’s within the participants part.
Like most excellent trading systems it isn’t difficult and does now not depend on too many symptoms. There’s a sequence of standards which are used to signal a trade. The primary of those is that the stock need to be in an uptrend and that is proven when it’s trading above a rising 34 week transferring average. For instance take a look on the chart under of a scrip BHP and spot the purple line (the 34 week MA) is rising and BHP is trading above it. So BHP is a candidate for a trade. We use a a hundred and fifty day MA which provides so much the identical outcomes on the grounds that it’s similar to a 30 week MA. Take a look at the picture beneath for extra important points. Click on on the picture for a bigger view.
Below the main chart is another indicator, the 7 day RSI. This is the Relative Strength Indicator. You will notice that there are dotted lines at 30 and 70 showing “Oversold” and “Overbought” conditions. What we are looking for are occasions where the line of the oscillator dips below 30. This happens in the middle of the chart and we have marked it by the blue ellipse.
The next step is to look for the candles to change colour to Blue and on the next day we look to enter the trade. It is best not to chase prices up but to see if it is possible to get in at a price not too far from the price range of the day when the colour change took place. The initial stop is set below the last low which is the low that gave the Oversold signal of the RSI.
You should note that the entry signal for this system is not necessarily when the candles move above the blue 2ATR(10) line (as it does when we use the Chandelier line) but when the candles change to the blue colour. This is because of the slightly different way the system is coded compared to the Chandelier indicator.
The 2ATR(10) stop line follows the price up but continues to track horizontally for 15 days when prices fall to provide a stop line for a long trade. If this was not done the line would fall with falling prices and never give an exit signal.
Getting back to the trade that is signalled on the chart, we can see that it is possible to enter at about $35 and that the initial stop is at $32.20 (first red arrow on the chart). In fact the previous candle has a lower tail but we are ignoring it as it was simply due to a technical problem which shut down the Sydney Futures Exchange for a while. The initial risk for this trade was therefore about $2.80. It is not advisable to take the trade if the initial risk is more than 10% of the price. In this case the $2.80 risk is less than 10% of the share price.
Another line on the chart is the lime green one which is usually above the prices. This is the “Take Profit” line. When prices close above this line it can be used as a signal to lock in profit. Notice that on the chart there are two occasions we have marked where this signal might be used to take a profit. In each case this resulted in a better exit than waiting for the stop line to take us out of the trade. This is not always the case and sometimes it will take you out of a trade which then goes on much higher. The profit taker signal needs to be used with discretion. In a stock which is undergoing a rapid repricing because of good news it’s use may be less likely to lead to good results than in a stock which is in a steady uptrend. This profit taker is also suitable for short term trades where it is important to get a good profit quickly. But remember that it is important to think of the profit in terms of the risk/reward ratio. If the profit is not at least twice the initial risk of the trade it may be better to let the trade continue until the reward (profit) is large enough to justify taking the initial risk.
Going back to the BHP trade, it soon took off as the panic subsided and new highs were made. On 29 September the price at the close was well above the profit take line and the next day the profit could be taken at prices above $43.50. After that the price fell slightly and then rose again to a high of nearly $48. By then in real time it would look as if the profit take exit was not an advantage but as things developed it became clear that it was in fact a good move.
The Jimberg AFL system has the 2ATR(10) trailing stop line to protect profit and this signals an exit if the price closes two consecutive times below the line. On 25 October it does close below the line but the next day is above again so the trade continues. Then on 5 November there is a second consecutive close below the line giving an exit at about $43.50, which happens to be much the same price as the profit take exit on 30 September. In this case the profit take exit would have saved us a month’s exposure to market risk.
Also note that on the left of the Jimberg AFL chart the two blue arrows illustrate another example where the profit take exit would actually have been at a higher price than the stop exit. It should also be noted that both of these two exits would have got us out of the market before the dramatic drop in prices in August.
Another interesting point is the divergence between the peaks of the RSI and the price. The line drawn on the RSI pane shows the RSI making lower highs while the price is making higher highs. This can be a signal that the trend is running out of momentum and in view of this warning it might have made good sense to get out of the trade after the first close below the trailing stop line. This would have made the trade a little more profitable. While this might help to manage the trade it is not part of the Jim Berg system.
At the bottom of the Jimberg AFL price chart you will notice the coloured ribbon which changes colour as buy and sell signals are given. It is not part of the coding given for MetaStock but Thomasz has added it as an extra feature in AmiBroker. This can be useful when quickly moving from chart to chart in a watchlist of shares which are in an uptrend and suitable candidates for trading with this system. In AmiBroker charts open so quickly that it is possible to scan through the charts rapidly looking for a change of colour at the end of the ribbon. It is then possible to pause at those charts which have a small patch of blue at the end of the ribbon and see if it is ready to trade.
You can download and use the Jimberg afl formula for Amibroker by clicking the button below. You need an account in Facebook to download this file.
And after you attach the Jimberg afl you will instantly see Jim Berg trading concepts appear in the charts. The above image shows how the Jimberg afl looks like. All sources are FREE from internet.
Indrajit is a professional blogger and trading system developer. Amibroker expert, Wordpress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.