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I was looking at December, January and early February. I don't trust anything from the past four weeks. The main difference I see is the frequency in trades is greater for the past four weeks due to the increase in number of ticks per day.
I haven't seen his video, but we have been on the sidelines for now. The timing of this was difficult, as we were preparing to deploy new strategies. He and I had an email exchange on regarding his stop loss resource pack this morning. I would like to do a comparison of the Kase DevStop concept, ATR, and fixed stop loss. Maybe next week if time allows.
Well, I don't have much time, so this is going to be quick. This was a great week of development despite all of the distractions. We have a couple of strategies ready for prime-time, barring any setback over the weekend. I have also done some more work on a strategy I mentioned in an earlier entry. When it rains, it pours, I suppose. It has been careful and delicate work, given that we are trying to develop strategies that are robust in multiple environments.
I will be working on my 4000 bar chart strategy. I have found the resolution needs to be adjust according to market volatility/volume. It is not highly sensitive (i.e. 4000 works on ES fine over the past 6 months), but needs to be tuned to the instrument (400 bars for ED, 1000 for silver). I am trying to figure out YM, but 1000 seems to be look good thus far. My only challenge is back-testing, since we just don't have tick data back very far. I will look into any vendors who may have data they can provide further back.
Anyhow, I am happy with our progress. It is wine o'clock, so I'm outta here.
Well, I keep missing my daily journal entries, but I am still in the game.
Seriously though, all is well. I have the kids at home, so I am home schooling, working for a client, and trying to keep up with my trading activities. Here is what I have:
MES, MNQ systems
I was working on coding these over the weekend, but my results are not matching my manual results. However, my wife/trading partner had better success with it. Maybe she is a better coder than I.
Fractals
I spent some time studying Bill Williams work on fractals. I am currently working with the Fractals indicator and the Alligator (essentially a glorified 3 line moving average). I have been testing across multiple instruments and I know these things to be true, as observed in silver, ES/MES, and YM:
Fractals almost perfectly identify channels, when used with the Alligator
Some signals come late or too late, which can be frustrating
High probability trades are taken
Works well in different timeframes and tick charts, though some timeframes are better than others
Here is a 1000 tick silver chart, showing a good channel:
I have applied this concept to some challenging periods and instruments, and it is pretty robust. I won't try to explain how to use fractals, but you can find info on the 'net. I found that it was best to just jump in and try to understand what I was seeing.
I am guessing most major platforms have Bill Williams indicators. Do not confuse the fractals for buy or sell signals. The signals require 5 bars: 2 left, 1 middle, and 2 right; the indicator is painted on the middle bar.
I submitted a strategy to the Strategy Club today, so hopefully that goes well. I won't know for about 6 months, though I will be able to track its progress on our own. It is a CL strategy.
Well, not much to report today. We were able submit and have a strategy approved for the 6 month incubation period in the Strategy Club (part of Kevin Davey's Strategy Factory). We hope it will pass and have a high level of confidence in it. I will update at the beginning of November.
In studying fractals and alligators, I stumbled across the following video of Bill Williams explaining how it all works. He is quite the character and nice to learn from the person who developed the indicators:
The guy is a hoot. The material really resonates with me.
Well, not much is new. I have mainly been studying fractals. I am referencing two books by Bill Williams and the YouTube video I shared a couple days ago:
Trading Chaos (the original text)
New Trading Dimensions
If you have ever wondered what market practitioners mean when they say the markets are 'fractal', Bill Williams does a pretty good job describing it. As I dig into random instruments and timeframes, the more I see it. I looked at daily heating oil (HO), daily Gold (GC), 60 minute (GC), 15 minute Silver (SI), and YM 1 and 5 minute, random points in time. The point is, they are fractal (within the constraints of price action). Think of it this way: you can zoom in or zoom out of a fractal (as a picture) and it looks the same at all levels. That's a fractal in the simplest terms.
Here is a picture that may or may not help (sorry about the Alligator lines):
Fractals require 5 bars and the fractal indicator appears on the 3rd (middle) bar. The tricky thing to understand with the fractal indicator is that it is only valid after the 5th bar closes. Example: the dot (or caret) appears on bar 3, then bar 4 closes, bar 5 closes..... now the fractal signal is valid. If you try to trade just the fractal signal, you are already 3 bars late.
Anyhow, it is a powerful tool, but it can be difficult to understand. It is old stuff, but seems to hold up over the test of time. Since I'm an algo guy, it will be interesting if I can codify any of this into a tradable system.
And speaking of algos, we successfully submitted our first strategy (TradeStation term for a system that can be automated) to the Strategy Factory's Strategy Club. The idea is that you submit a strategy that you develop and it has to survive and thrive during a 6 month incubation period. If it passes, i.e. achieves certain metrics, then I am granted a successful strategy developed by other club members.
We had some hiccups, particularly with StratOp WFP, but we worked through that with Kevin.
The Lighter Side
Sometimes really good stuff on FIO gets buried in the sheer volume of posts. Here is one post I subscribe and contribute to regularly: Funny pic of the day. It is so worth getting some laughs during the day to break the tension and/or boredom.
That is all for this week. I have a ton of work backed up, so I better get on that. Have a great weekend everyone! If you can, get out to a park, go for walks, or whatever, while practicing your social distancing.
Not much new with trading except for one thing. I have been exploring fractals, as described by Bill Williams in Trading Chaos and New Trading Dimensions. I performed analysis on our current ES contract, 1 minute, using a method of trading he calls the 'thumb trade' (a fractal method described in Trading Chaos), over 23 hours (from open Sunday night to close Monday night). I had no stop losses, accounted for $30 for slippage and commission round trip. This was 'always in' with no additional filters.
Disclaimer: This is totally ridiculous way to trade, but I was trying to prove/disprove an idea.
$2,103 largest drawdown (5 trades, no stop loss used)
$6,710 net profit
For comparison, I did the same period on 30 minute chart, just to prove the fractal idea:
3 trades
66.7% win rate
$734.17 average trade
$1,000 largest drawdown (1 trade, no stop loss)
$2,203 net profit
I did the analysis by hand using Sierra Chart, some of it live, some in playback mode. It was tedious, but allowed me to see how this idea operated. The big thing now: can I code it and test it? I go through these ridiculous exercises precisely so I know what I am coding. When does a signal become invalid? How will variables be handled, i.e. set and reset? 95 trades helped me answer a lot of questions like these. It is a good start.
As I am writing this, a typical move occurred, shown below (35.75 point). Here is how the thumb trade plays out (fractal high is the middle finger bar) on the 1 minute chart:
Rules for a short entry:
The forefinger has to have a higher high and higher low than the thumb
The middle finger has to have a higher high and higher low than the thumb
The next bar after the middle finger has to have a lower high
Enter short (stop or limit) if the price touches the low of the thumb bar
Just another day loaded with client (non-trading) excitement. The only new is that I am reading Bill Williams New Trading Dimensions. It describes his indicators in detail. There is some pretty powerful stuff in here, and the guy is quite a character. Quote of the day from the book:
The biggest thing I am learning at the moment is how to use his Awesome Oscillator. Just slapping on a chart, it now makes more sense than when I just tried to muddle through understanding it, or trying to find deeper meaning.
That is all for now. I hope to get back to trading activities next week.
Well, it has been an exhausting week. My wife has been awesome, allowing me to attend to client work (and a little bit of this), while handling the kids, and her own trading activities. I know she lurks around here from time to time, so I am blowing a kiss to my wife: You are the best!
During the little time I have had to work on trading, I have been studying Bill Williams' work on fractals. I have been trying to understand how the Awesome Oscillator can be used in trading. It is similar to the MACD and 3/10 oscillators. We are really looking for three different signals: twin peaks, crossover, and saucers.
This is a sugar #11 60 minute chart:
I did not cherry-pick the best looking chart, I just picked the closest. So in my testing, starting with the first twin peaks signal, sell short, then reverse to a long position on the next twin peaks signal. I could have added to my position at the crossover sell, saucer sell, or crossover buy points if I wanted, I suppose. I just wanted to show the different points.
I ran this against a few different instruments and timeframes, only taking these three signals (no stop loss). With stop losses the results would have improved dramatically. I like to see what it looks like running free, before applying any additional filters.
Awesome Oscillator Successes:
Sugar #11 30 min (not the best)
Sugar #11 60 min (you see above....really good)
ES 60 minute, it works but skeptical because other timeframes stink
Gold 60 minute, it works
Gold 240 minute (my wife's favorite timeframe), it works
Awesome Oscillator Failures:
Any tick chart....I have noticed that fractals are not useful for tick based charts. I have tried a few different instruments and tick ranges (400, 100, 1000, 4000) and they all bomb
Sugar #11 10 min , mildly profitable, but not worth it
ES 5 min, profitable, but not worth it
ES 30 min, bad
ES 90 min, bad
If you are interested in reading more about fractals and the Awesome Oscillator, I suggest getting a copy of New Trading Dimensions. It is 22 years old, but there is a lot of good stuff in it and appears to still be relevant and useful. I found the explanations of Awesome Indicator a lot better than anything on the internet.
That is all for this week. Have a great weekend, get some exercise and fresh air, while practicing social distancing.
Ugh, today was about the worst. I have client responsibilities, but we also have to keep our kids on task with school work. They are both highly distractable creatures and are not what I would call self-starters (at least when it comes to schoolwork). So today was one of those exhausting days where not much was accomplished.
Oh wait, this is a trading journal. Let's get to that....
Not much happening. My wife/partner is working on an automated forex strategy, which is pretty cool. The only thing I have been able to do in the past two days is some analysis on Bill Williams' Awesome Oscillator. Today I looked at two things: ES on 5 and 60 minute charts, since Sunday evening open.
Awesome Oscillator for this week, 60 minute ES Chart
The 60 minute chart produced three signals, simply with this rule: take the first signal in one direction, ignore signals in the same direction, reverse to the opposite direction. No stop loss (to keep it simple), $30 round trip slippage and commission. Three trades, 2 wins, 1 loss: +$4460 at end of day today. With a stop loss, it would have been much better.
When the Awesome Oscillator wins, it wins big. I understand that when using this, tight stops are okay and other indicators need to be used. In any case, this performed better on 5 minute than last week. There are a couple of ways to improve this, but I am finally getting a handle on it. If you have used the 3/10 oscillator, it has some similarities.
That is all for today. I am exhausted. Until tomorrow....
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
My wife has been very surprised how much she is having to help our youngest son and a lot of people I talk to are having similar issues. Reading an article today that was saying in some schools a third of kids have not logged on once!
You are the best!