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Attack of the Robots - An Algo Journal


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Attack of the Robots - An Algo Journal

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  #201 (permalink)
Legendary Systematic Algo Trader
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Experience: Intermediate
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I am going to add a little clarity to how ATR would have improved my stops last Friday. I had a set stop loss of $300 per contract, for both ES and RTY. A string of 3 stops in a row for ES left me at -$900, wiping out some earlier profits and sinking me into the red. Another stop over on RTY cost another -$300.

Now, introducing ATR, I ended up with three stops:
  • ES: 75, 125 100
  • RTY: 87.50
...for a total of $387.50. Compared to $1200, that is significantly better.

That is all for now, have a great day trading!

~vmodus

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  #202 (permalink)
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Someone asked for the EasyLanguage code. Here is what I have, with the following assumptions:
  • ATR length = 14 bars
  • Multiplier = 3
 
Code
vars: 
   ATRValue(0) ;

ATRValue = AvgTrueRange(14) ; 

SetStoploss(ATRValue * 3 * BigPointValue) ;
You may need to adjust your code depending upon what instrument you use, but this is what I use for index futures. Use at your own risk and discretion.

~vmodus

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  #203 (permalink)
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Thank you! That's very helpful.

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  #204 (permalink)
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Well, I have made it to Wednesday evening without losing my mind. I got the majority of my client work completed (still have to travel tomorrow) and was able to focus on some trading activities.

The range bar strategy has been a pain to test. It has had some spectacular wins, and slow agonizing drawdowns. Of course, I am running this over 23 hour sessions, for data collection, so none of these results are real. This is starting to be extremely laborious to test and gather data. I think for this next cycle I will just run this on ES only, as both RTY and ES together are making my head spin.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

ADX and ADX Again
We have be working to get a strategy that we believe would pass the Strategy Factory Club criteria for entry. We had one strategy that was very promising, but totally failed in two of the walkforward periods, so we had to scrap that. My partner has been working on a couple of other strategies which we hope to submit.

I was listening to the Better System Trader podcast last week (thanks @SMCJB for the recommendation!) and @kevinkdog was discussing entries and exits, and mentioned one of his latest books. So I bought it from Amazon for $2.99 (Kindle version) and started looking at some of the entries (I later found out that I already had that book from the Strategy Factory tuition... duh). His intraday strategy (#7) caught my eye, so I started working on that a little bit. I have been toying with ADX for about a month or so, but have not integrated into any strategy. This led me to some additional research on ADX, and realized that I have a use for it as an entry (not as Kevin describes).

So I spent a little time analyzing it for use with a custom OBV indicator that I developed (OBV SuperSmooth, I call it). Combining the two for entry and exit signals has some promising results on NQ and RTY, when looking at a sample of about 50 trades. I haven't coded it yet because I have not even documented it yet. I have two ways to trade this and it looks good for indexes thus far, but I haven't figured out entries, so I will fork those into two separate ideas and see where it leads.

Back to the #7 entry I mentioned above, I plugged it into one of my existing strategies that had a pretty lame entry, to see if it would improve (I like my exit, for the most part). It did poorly on RTY, but surprisingly well on NQ. I am testing different timeframes and it is really just an idea, since I was just plug-and-playing the entry. It has some promise.

As a side note, I recommend the book I just got: Entry and Exit Confessions of a Champion Trader: 52 Ways A Professional Speculator Gets In And Out Of The Stock, Futures And Forex Markets . For $2.99 Kindle version (or free if you have Kindle Unlimited), you can't beat it. Just more ideas for our trading.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

The rest of the week
Tomorrow I will probably just have my range bar strategy collecting data, as I will be away from my office for a good part of the day. I am starting to see this strategy as high hanging fruit, and maybe one that I do not have the time to climb and pick. I will decide by Friday if I want to try this in micro e-mini ES (MES) next week.

I also have to catch up on my documentation and recording results of the various tests I have been doing.


See you all Friday!

~vmodus

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  #205 (permalink)
Legendary Systematic Algo Trader
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I had about 2 hours after I got back from traveling to code two system ideas I had yesterday, and perform some feasibility testing. The big idea is that we let ADX sit below 25 for a long time (~30 bars), and when it breaks out, go in the direction of the trend

Idea 1:
  • ADX entry (>25 only after being under 25 for n number of bars)
  • OBV for direction (my custom OBV)
  • OBV for exit
  • ATR for stop loss
  • Do not trade during NYSE open (925-1030)
  • Index futures, 5 minute charts
This one failed feasibility testing, but that's okay. It actually might work on longer timeframes and different markets (30 min or greater).

Idea 2: same as above, but...
  • ADX crossover for exit
This one did a lot better and passed feasibility testing. So now on to some backtesting, etc. I have not had much to show in the way of images (data is boring), but here is Idea 2 in action:


The trades are not market beaters and usually get into the trend late, but the idea has some utility. The trade on the left was worth about $325 and the right about $125 after commission and slippage. I'm not completely comfortable with the OBV direction, which sometimes give a false trend (it lags), so if it fails too often, I may go with a trend from last few bars. But that is another idea.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

During my 4 hours of driving today, I gave some thought to my chart trading brothers and sisters, as I listened to the Better Systems Trader podcast. It occurred to me that we are all systems traders, automated, or manual, if we are following a set of rules for our trading and not just beating entries on a keyboard. Anyhow, just a thought.

See you all tomorrow!

~vmodus

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  #206 (permalink)
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Let's panic.

But seriously. I fired up TradeStation last night, and saw the gap down on ES and NQ at the open. I am not surprised. I watch a bit of soccer/football, so seeing several matches in Italy (Serie A) cancelled due to COVID-19, I was not surprised.

The reason I worked last night is that I have been working on an idea that may prove difficult to code, so I am going through a manual analysis. The main thing I am looking at doing is using ADX, iTrend and a custom OBV indicator to give me only the best entries.

The Big Bar Problem
"Sometimes you eat the bar; sometimes the bar eats you."
So I have a big bar problem:
  1. When we experience the big bars, indicators based on price have trouble recovering.
  2. After a little while, we settle into a range or channel
  3. The distance of the indicator from the prices indicate that the indicator is still affected by the earlier price action
  4. As such, a later crossover is delayed by at least one bar
After a ton of analysis on the 'Big 4' US equities index futures, I see that this is one of the main weaknesses of my system. I do not adequately compensate for a bar that is n number of standard deviations from the mean H/L or HLC price (or any combination therein). Any decision making, i.e. rule that I have coded into my strategy/algorithm, is bound to have a bunch of these failings.

For now, I am working on a solution for this: if a big bar happens, then wait about 14 bars for the indicator to normalize before trading again. What makes a big bar? I will figure that out, maybe using a standard deviation calculation.

I don't know if I can or want to code this into a strategy. There is a risk of creating too many rules, or heaven forbid, curve fitting. The simplest models tend to be the best models, and this is trending towards complexity. However, the problem above has been an issue and I think it bears taking into consideration when developing my strategies. (Puns intended)

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

To determine if a system may have merit, I have two choices:
  1. Do it manually, either on a chart or in an Excel workbook
  2. Write some bare bones code and see what happens
#1 is time consuming, but allows me to get closer to the idea. There is the risk of confirmation bias, in seeing only what I expect to see.
#2 is much quicker, but then it obscures problems like the Big Bar problem noted above. There is also a tendency to toss away a good idea because the initial results do not look good. I can very quickly code a lot of different types of strategies, so the speed at which I can move from idea to feasibility testing is great.

I will generally use a combination of both methods, starting with #1 and then moving to #2. In the case of my latest set of ideas, dubbed 'Triple Crown', I used 1, then 2, and then 1 again.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Back to today's nonsense in the market, I love days like this. COVID-19 is really bad (not as bad as the flu, mind you), but I am not going to freak the frack out because of it. Any time I see futures down > 1%, I step back, observe and think. We all have our favorite movies about trading (Trading Places, Boiler Room, etc.), but one of my all time favorites is It's a Wonderful Life. George Bailey is about to go on his honeymoon with a huge wad of cash when a run on the banks occurs (early 1930's), including George's Building and Loan. George returns to the Building and Loan to keep it from collapsing.
"Don't you see what's happening? Potter isn't selling. Potter's buying, and why? Because we're panicky and he's not.
That's why. He's picking up some bargain."
George Bailey, It's a Wonderful Life
Okay, IAWL is not expressly a movie about trading, but the lesson is on-point and timeless. I like shorting the panic and buying the rebound.

Testing my system in sim today on RTY (using manual entries) I was able to close $1,644. It is one of those rare occasions that you hit a bottom or have just the right entry at the right time. I had two of those once-a-year trades (started with two sideways trades: +$50 and a -$110).

Yes, this is sim and I'm not a discretionary or manual trader. I am working through the proof of concept, and the volatility we had today was perfect for testing my system. If I have to trade it manually, I will, but I would rather let the machine handle the entries and exits.

As a side note: I could have and would have traded live today, but I do not have a system or methodology that I would trust. I have stepped into the market on such days without a system or rules, and been absolutely slaughtered. So the long process of developing trading methodologies, models and strategies is part of getting me to days like today, when I can grab a trading model, step into the market, and profit from the panic.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We were prepping for a strategy submission to the Strategy Factory Club, as the deadline is today for EasyLanguage strategies. We have a good strategy that passes all backtest, walk-forward, and Monte Carlo testing. Unfortunately, it contains a custom indicator that I don't want to release, as it may be part of our edge (or not). Gotta protect whatever IP we have.

I hope we have something for the March submission. I have a Eurodollar system that is promising.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all I have for today. Have a good evening and see tomorrow!

~vmodus

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  #207 (permalink)
Legendary Systematic Algo Trader
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Lightning strikes twice. So today, again COVID-19 poured a ton of FUD into the market. That being said, my system tracked the long downward trend from 930 ET to 1430 ET on RTYH20.

The system I am developing has a strength in catching a trend and staying with it. So here was my day:





I am 'holding' one contract over the session close.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

This is all fine and good, but lightning does not strike with this consistency. I'm seeing unicorns here (black swans... insert your favorite metaphor), when I really want to see deer (they are everywhere these days, it seems). I could have these two great days followed by a crappy month and watch all of this dwindle to nothing.

I completed two weeks of analysis (March 2017), and it wasn't pretty: -$1,115. There are some data inconsistencies on 3/7 and 3/8 around volume and open interest which appear to have thrown off my indicators... not sure what is happening there, but caused my indicators to go wonky and point in opposing directions (and two losses totaling $600).

There is more work to be done. The big bar problem is still that: a problem.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all. I am still grinding through. We are working a heating oil strategy that we may submit to the Strategy Factory Club. We believe it passes all of the criteria, but I need to check with Kevin on a couple points.

Have a great evening!

~vmodus

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  #208 (permalink)
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I should clarify the entry and exit prices. Those are my shorthand (e.g. 40 = 1640). Hopefully, that didn't cause any confusion for you folks.


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~vmodus

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  #209 (permalink)
Legendary Systematic Algo Trader
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I am still plugging away at my strategy. I got really frustrated with the slow pace of things (two random weeks in 2017 took me a few hours), so I sped it up by writing all of the rules into a strategy. When I put it all together, I had about 40 combinations of entries and exits to test. It took me as long to write the code as it did to do two weeks of analysis.

The strategy is not useful as a trading tool, but is useful an analysis tool. It boils down to this (ADX is used to confirm entries and reversals):
  • 2 signals for long
  • 2 signals for short
  • 2 signals for exit long
  • 2 signals for exit short
  • 2 signals for reversal long to short
  • 2 signals for reversal short to long
For this current session on RTH20, my system had three trades generated: -$515 (stop loss, variable with ATR multiple), $55, $625 (after slippage and commission) total $160 net. I haven't evaluated the trades, but I'm surprised it did this well. I still have a big bar problem....to be continued.

I did learn two interesting things with this strategy. 1) Close out any open positions Friday before close. 2) Do not trade the first bars after session open. In the case of a gap, the indicators I use still haa an 'echo' or artifacts from the prior session. This is related to the big bar problem described a couple days ago. I have built-in a wait of N number of bars before allowing trading to commence, else there is usually a bad trade because the indicator is wrong.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Overall the strategy I am developing does not appear to do well in the long term on the 5 minute chart. There are some jaw dropping trades (see yesterday's entry) and then groups of bad trades. It just a little better than a coin flip, i.e. not a viable trading method. Changing the resolution to 15 minutes or greater seems to provide better results. More work to be done.



That is all to report for today. I hope you are all doing well this crazy week.

~vmodus

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  #210 (permalink)
Legendary Systematic Algo Trader
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vmodus View Post
The strategy is not useful as a trading tool, but is useful an analysis tool. It boils down to this (ADX is used to confirm entries and reversals):
  • 2 signals for long
  • 2 signals for short
  • 2 signals for exit long
  • 2 signals for exit short
  • 2 signals for reversal long to short
  • 2 signals for reversal short to long

I would like to add a little clarity here. This is essentially 16 unique entry/exit combinations (signals repeated in reversals). In other words, this is 16 different strategies/systems.

~vmodus

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  #211 (permalink)
Legendary Systematic Algo Trader
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Posts: 955 since Feb 2017
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Tonight's entry has to be quick as it is late, I'm tired, and still have work to do.

Running the system I have been developing today produced the same results as the prior days: lots of wins.
+365, -195, +320, +195, and +2150. I even had a profitable long trade in there, amazingly. Here is today's chart with the trades:



Just for perspective, If I had run this system from the beginning of the month, I would be at +2625. If I had been running it since the beginning of January, I would be at -95. Just this week is tracking at +6040. So if you're paying attention, without these four days, the system is crap, at least running 23/5. There is no time of day, nor day of week, that I have analyzed over 3 years of date over 4 index futures, that performs better or worse.

Now, one thing I am certain of: I have at least one system I can run during a market 'correction'.

The main takeaway for me is the my resolution is too fine, with respect to timeframe, for this strategy (or rather, set of strategies). 15 minute and 30 minute has more promise.

I worked on some other strategies, as well. I have been reading a couple of trading books, but will share that tomorrow if I have time.

I'm knackered, as the Brits say. See you all tomorrow!



~vmodus

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  #212 (permalink)
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I am doing my daily entry very early, mainly because I am actively (live) trading, I need a momentary distraction from the market to let my position ride. I took off my algo hat this morning.

I mentioned yesterday two trading books that I'm reading, both of which I highly recommend to all traders.

Entry and Exit Confessions of a Champion Trader: 52 Ways A Professional Speculator Gets In And Out Of The Stock, Futures And Forex Markets
Kevin Davey's books (@kevinkdog) have impossibly long titles. Aside from that, he writes very practical, useful, and valuable books. I got this on Kindle for $2.99 (free if you have Kindle Unlimited, and $6.99 dead tree version). Anyhow, this is a book of 41 entries and 11 exits that traders can use in their systems. Although it is geared towards algo/system traders, there is value for the discretionary trader, too. There are plenty of novel ideas, most of which have been traded actively by Kevin. He includes EasyLanguage code and plain English explanations. Entry #14 kind of points to my big bar problem. Anyhow, you might want to check it out on Amazon. For 2.99, it is a great value and pretty easy read.

Trading Sardines
This book by Linda Raschke is awesome. I heard Linda on the Better System Traders podcast (How to Achieve Long Term Trading Success, where she mentioned her book. Her site has a sample first chapter, which describes her baptism by fire. If she can survive that, I'm sure anyone can. The book is funny and timely (or timeless...whatever you prefer). From Chapter 2:

Quoting 
The finance industry has a funny way of renaming things to make them sound better to the public. Take the term 'correction', for example. What a cute word for what actually represents a 10% drop in the market. "Oh, the market's just correcting itself." Like it make a boo-boo. Puh-lease.

Anyhow, the book is a hoot. I can't wait to finish it. You can buy it over on her site (click the title above).



Full disclosure: I don't work for Kevin or Linda, I'm just a fan. Just sayin'.

Anyhow, more work to do on strategy building. I hope you all have a safe and enjoyable weekend.

~vmodus

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  #213 (permalink)
Legendary Systematic Algo Trader
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vmodus View Post
Trading Sardines
This book by Linda Raschke is awesome. I heard Linda on the Better System Traders podcast (How to Achieve Long Term Trading Success, where she mentioned her book. Her site has a sample first chapter, which describes her baptism by fire. If she can survive that, I'm sure anyone can. The book is funny and timely (or timeless...whatever you prefer). From Chapter 2:

Anyhow, the book is a hoot. I can't wait to finish it. You can buy it over on her site (click the title above).

One quick note: I believe Linda's book is self-published, so you can only get it on her site as far as I know. To paraphrase her from the podcast, Amazon didn't write the book so why should they get money for it.

~vmodus

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Legendary Systematic Algo Trader
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I missed yesterday's entry, mainly because there was nothing new. I just have my nose to the grindstone, diligently working away.

I am, as mentioned last week, reading Trading Sardines by Linda Bradford Raschke. This book is a great resource for traders. The big thing that I get from this is that no one has the markets figured. Also, a trader can never know too much. She is an avid student of trading, which shows through her depth of knowledge. I love the little snippets of wisdom that are set in bold, so you can just flip to a page and get some market wisdom. This book is like a trader's devotional, at least for me. If you are serious about trading successfully in the long term or for a living, this one has to be on your shelf. It is pretty humorous, too.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I have been torturing a strategy that I developed for NQ. It is based on John Ehler's MAMA (MESA Adaptive Moving Average, or Mother of All Moving Averages.... you decide) and FAMA. TradeStation has these two calculations built as functions, so I built a strategy around them. After several days of torturing my strategy, trying to get the short side to work, it dawned on me that it might just not work on the short side. After going back to some of Ehler's writings on MAMA, I realized that the examples I saw were only taking long entries (S&P and stocks). So torturing my strategy (and doing a lot of scanning of the chart and indicators), did nothing. I need to be happy just to work the long side.

So that one passed feasibility and back-testing, so now I have to do the optimization and walk-forward testing. That should be a hoot. Thankfully, at a glance, it only needs to be lightly optimized.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

My Favorite Indicator
Okay, hyperbole aside, this is a favorite indicator. I am going to show in one simple image why this is a favorite:



ADX has a number of uses, but for me, identifying when to stay out of a trade is very valuable. The general idea is that if the ADX line is above your trigger line (I use 19-25, depending on the strategy and instrument), then there is a trend happening. The larger the number, the stronger the trend. In the example above, if I had applied an ADX filter, three of those trades would not have been made. It is not the best for exiting, such as when you get in on a long, slow trend, but it is pretty useful.

One additional use that I have just started exploring is using the reversal of the ADX value for exits, or reversing my position. If the number is high (>35 or so), then comes back down, there may be a reversal. It doesn't happen all the time, but I am looking deeper into this. If you aren't using ADX, you might want to check it out.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Other than that, I am working on an OBV strategy inspired from some work my wife did on one of her strategies. It looks good on multiple instruments, but I am focusing on NQ, ES, and YM for the moment. I will be able to test this on MES at some point.

That is all for tonight. See you all tomorrow!

~vmodus

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This is a supplemental entry, but one that reflects how much I do not know. I did a quick search last night for micro e-minis, mainly because I wanted the contract specs for MES (micro e-mini S&P). I ended on the CME micro e-mini page and was stunned: where did all of these micro e-minis come from? I guess I haven't been paying attention, but now there are a whole bunch, and with good volume.


Source: https://activetrader.cmegroup.com/Products/Microemini?s=MNQ

Indexes, currencies, metals, oh my!

Yeah, so that happened. I am thrilled, since one of my strategies only performs well on NQ, and I don't really want to have it go live (if it passes walk-forward) on such a large contract. It is one of those with a low win %, but plenty of large wins to offset the losers.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Micro E-mini Transaction Costs
I traded my first ES micro e-mini last week, so I wanted to share the cost of trading, versus the ES. This includes commissions and fees:


The % column shows the percent given to the broker for a 1 point profit. I know others here at FIO have done similar analysis, but this is mine. I think it is enlightening from my perspective, particularly when deciding what and how to trade, and how to allocate our capital across instruments.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I am forward testing another of my strategies on MNQH20 and MESH20. I ran it overnight and it looks good thus far. I am used to running a strategy in simulation overnight and having it drain the sim account. This one did not. It is a strategy that uses range bar charts and uses OBV to signal both entries and exits, with only stop losses. I tried adding some ADX filtering to it yesterday, but that made it perform worse (will work on that). Anyhow, now it just has to run and prove itself over many, many trades.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Linda Bradford Raschke Quote of the Day:

Quoting 
You can't predict in advance where the big wins are going to come from - just keep taking every system signal.
From Trading Sardines

~vmodus

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Maybe obvious but there are also some mini's that may be more attractive than trading the full size contract. QM is Crude Oil (500 bbls / half size), QG is Natural Gas (2500 MMbtu, quarter size). There are others (eg Corn, Soybeans) but the volumes are low. Common practice when trading Micro's or Mini's is to plot them as data1, plot the fullsize/most liquid contract as data2, make all your decisions based upon data2 but execute in data1.

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SMCJB View Post
Maybe obvious but there are also some mini's that may be more attractive than trading the full size contract. QM is Crude Oil (500 bbls / half size), QG is Natural Gas (2500 MMbtu, quarter size). There are others (eg Corn, Soybeans) but the volumes are low. Common practice when trading Micro's or Mini's is to plot them as data1, plot the fullsize/most liquid contract as data2, make all your decisions based upon data2 but execute in data1.

Yeah, great advice. I have analyzed the relationship between the micros and e-minis a little bit, but haven't developed an idea or strategy around it. We have several strategies that reference data2 (I also use ADE from time to time), which open a lot of new trading possibilities. I am happy to see new MeM's introduced, as it allows for a lower risk incubation period for automated strategies that are on the bubble.

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High frequency arbitrage keeps them in line tick for tick - at least in the prompt month. For MES/ES I would think the charts will look identical. For things like QM/CL they will look different. That isn't because they trade differently it's just that QM doesn't trade as often as CL but the bid/ask is there and will be virtually identical.

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I don't have much time, so here is my update from yesterday's sim trading of one of my newer strategies:
  • MNQH20: -542
  • MESH20: -342
  • Total: - 884
Yesterday there were a lot of consolidation periods that killed. Also, my entry is hypersensitive, so consolidation periods are the worst. I have two ways to adjust sensitivity, but lag comes into play. This system is a pain, since it does not produce accurate backtest results. I just have to gather a ton of data from sim and then see what works.

I hearken back to yesterday's Raschke quote: take every signal. So I made a little graphic for myself (backtest equity chart), printed it and put it on my trading wall:


If the system is solid, it can still have a $5,000 drawdown period. I can have (as seen above), 100 trades during that period. Do I have the intestinal fortitude to continue forward during these times? You can see what would have happened if I discarded the system too early. The trade you fail to take is the trade that makes your week, month or year. This morning I am back in the green. So I press forward.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Testing today (starting at 1800 ET yesterday):
  • MNQH20
  • NQH20
  • MESH20
  • M2KH20 (RTY)

Linda Bradford Raschke Quote of the Day:

Quoting 
Technology offers the trader more resources than ever, but it is experience that has a greater edge.
From Trading Sardines

Things I am thinking about:
  • Swing opportunities after big intraday moves
  • Parabolic formations
  • Diversification
  • The challenges and advantages of testing systems in these market conditions
Have a great trading day!

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Quoting 
Things I'm thinking about: The challenges and advantages of testing systems in these market conditions.
- Me

Yeah, I wrote that earlier.

I ran my strategies in sim for a 23 hour cycle. These are strategies that I have to forward test only, due to their nature. Four instruments: NQ, MNQ, MES, and M2K (RTY micro). -$5883. Ouch. But I learned some interesting things in the past 27 hours:
  • This strategy does well in the quiet times (read: low-moderate volatility). At 700 ET, I was +$1500.
  • The micros got killed, probably because my signals were too sensitive.
  • NQ held it's own until early this afternoon, when all heck broke loose.
  • Consolidation periods killed any profits, primarily during the high volatility. I have a couple of solutions in mind for this.
  • Micro ES ended up being the 'best' performer (still losing), at -$200 for the day. It had less sensitive entry signals than the rest.
  • My exits suuuuuck
I only have two days of data (but a lot), but some patterns and themes are starting to emerge. I have dialed back the entry signals and the first couple of hours tonight are doing well. I shall have to see what this looks like in the morning.

It was a slaughter and trial by fire, but I am learning a ton by watching the tape. The most interesting thing to me at the moment is the pullback from a peak in ADX. If ADX is over 35 and reaches a peak, it will signal a reversal a majority of the time. The greater the value at peak, the stronger the reversal signal. It is at least 1-3 bars earlier than nearly any other signal that I regularly use.

That is all for tonight. I will probably post a couple entries tomorrow, just so I can report overnight results and EOD results.

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The last 12 hours were interesting for my strategy. At about 2000 ET, it was a little over +$2000. When I awoke, it was -$2000, give or take (mostly take, I suppose ). Now we are sitting at +$100.

The micros are suffering and dragging the boat under. NQ by itself is +1241 from 1800 last night, which is not too bad. We shall have to see what it looks like at end of day. I expect it to get beat up this afternoon.

I think I will take this strategy and just run it all of next week on NQ, as it has been the best performing all week. The micros appear to need some different parameters. I would have expected the micro NQ to match the NQ, but that is definitely not the case.

To be continued later...

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I missed Friday's journal entry because I was really busy. It was pretty much of the same. I collected enough data to realize two things:
  1. My system is not tradable as-is
  2. There are some really great things that I learned, including a way to use the indicators for discretionary trading. In other words, I believe I have a methodology for discretionary trades. What I don't have is time to further develop it, at this time. I would need a solid three weeks to spend just with this model I have, to make sure that it isn't just a mirage. I don't have three weeks uninterrupted to dedicate to this. So it will go on the shelf while I work on some of the things we have brewing.
I was able to stay out of the fray this past week and today. I had considered taking a short position Friday at the close in MES (and wish I had), but that would have been just a hopeful short entry. The COVID-19 news wasn't going to get any better in a couple of days. In any case, I have been protected throughout, so I am thankful I have not taken any unwise trades.

I am looking into a couple of things with equities. I am responsible for a couple of educational savings accounts, in which I can only trade equities and only long positions. I have 4 different ideas using the Fisher Transform indicator to signal short term trades. Here is what it looks like (15 minute timeframe):


It scales to different timeframes. Fisher Transform is tricky because of the number of signals it produces, so it needs something complimentary. I am looking into Parabolic SAR as one option.

I would use TradeStation to generate the signals, then enter the trades over on the other platform. It would technically be algorithmic, but the trades would have to be entered manually. I will have to look into possibly using TradeStation to send the buy signals to my broker. The equity side of things is pretty important, because we will want to get on the correct side of the recovery.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We are working backtest and walk-forward of one of our systems under development, so we shall see how that pans out.

I have a ton of client (non trading) related work this week, so I will not be spending a lot of time in the market this week. I will keep my eyes open for any trading opportunity that may present itself.

~vmodus

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vmodus View Post
The micros are suffering and dragging the boat under. NQ by itself...

MES was tight but volatile today but slippage on MNQ would have been large, bid/ask was 5+ ticks constantly.

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Holy.... where did this week go? I realize I haven't done my journal entries all week. There is obviously a lot happening right now. Anyhow....

We continue to develop our various strategies, despite all of the distractions. We have found some opportunities in the index futures that actually work, so we are running that on MES and may move to the ES if it is behaving as it should. It just started running last night, so it is too early to make much of it. I hate starting things this late in the week, as there just aren't enough trades to be meaningful. The model is simple, but robust.

Here is a chart from some current action:


I am using a couple of indicators from John Ehler's Cycle Analytics for Traders. His writing can be pretty arcane, but there are some gems in there. It took me a long time to understand and apply his concepts to my trading. To me, it has been akin to chasing the Firebird feather.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I ordered a handful (a college student handful) of trading books this week:
  • New Concepts in Technical Trading Systems, Wilder, J. Welles
  • Trading Psychology 2.0: From Best Practices to Best Processes, Brett Steenbarger
  • Dynamic Trading : Dynamic Concepts in Time, Price, Pattern and Trading, Robert Miner
  • Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, John Murphy
  • Beyond Technical Analysis: How to Develop and Implement a Winning Trading System, 2nd Edition , Tushar Chande
Since I am essentially a market technician, I realize that I need to do a deeper dive into all things technical. I scored good deals on the above books and I am sure they will pay for themselves. It will keep me busy, at least.

I stumbled across the Chartered Market Technician Association (f/k/a the Market Technicians Association and a/k/a the CMT Association) website last night. I have no real need to become a Chartered Market Technician from a career standpoint, but I think going through the charter process might be a good thing. I would love to geek out in their knowledge base.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

The Current Market Situation
No one likes the unknown and COVID-19 has introduced a new kind fo unknown to the markets. Black swan, fat tail... whatever you call it, it isn't a good thing for equities. Thankfully my equities exposure is actually pretty low, mainly in education accounts for my kids.

One of the things that drew me to futures trading was the ability to work either side of the market and trade any market condition. I don't short stocks and the rules are different now anyhow. Having done a lot with equities many years before working with futures, it took eons for me to wrap my head around shorting the market. How could I sell something I didn't have? I'm okay now.

I have a few mantras that I have, but this is one of my favorites: I don't care if the market is moving up or down, as long as it is moving.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Linda Bradford Raschke quote of the day:

Quoting 
All you need is one good idea.
Trading Sardines

This quote came from the 'Nigel' chapter. My reading of this chapter was very timely. We have produced a few hundred different strategies, but have come away with only a few that are worth trading. It is exhausting and can be discouraging. The Strategy Factory helped us a lot in this regard: if it doesn't work, throw it on the scrap heap and move on. Don't beat the dead horse.

The other big takeaway from the chapter is the importance of having many models. Explore every idea, ask questions, be creative, but methodical. Have a process and avoid bias.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all for now. I might post later today. Stay safe and be smart out there.

~vmodus

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I'm still working, but I am going to get this out of the way, since my trading week is done. My strategy ran well today. It does not take a ton of trades (2-3 per day) due to using a 30 minute chart, but they are generally quality. I had one loss and one win, with a minor $ loss (I don't discuss $ specifics from live results). All-in-all I am happy with the execution.

I have a lot of documentation of the research, ideas, and testing that I have been working on this past week. I think it was a good week. Lot of new and good things happened internally, with lots of new ideas and new workable strategies. I will set my strategy to run Sunday night on the MES June contract (MESM20). That is all I have for now.

Have a good weekend everyone and be smart about person-to-person contract.


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Happy Monday gang! I hope so, at least. All is well on my end, preserving capital and taking low-risk opportunities as they appear.

I ended up working some of the weekend, not because I love work, but because I am full of ideas and it is just as much of a hobby as anything. I finished reading Trading Sardines, which I recommend to any trader of any level of experience.

Right now I am doing some experiments with John Ehlers' Early Onset Trend, featured in TASC, August 2014 (Click the link for the code). It is an interesting indicator. I have a version on Sierra Charts (available on their support forums) and the one published in TASC. As usual, Ehlers is trying to jump the gun by a bar or few, and get to a no-lag state through use of cycles and noise reduction.

I like the one on Sierra Charts better because it uses only one line and changes color when a change in trend occurs. I will attempt to replicate this in TradeStation, as the indicator in TASC has two lines. The one thing about this is that it only has a long bias, so I am fairly certain Ehlers intended this for be used for equities. I know it can be adapted for a short bias, but I am not sure when/how to switch between the two. Below is the Sierra Chart version, with the indicator at the bottom:



I like how it works at the market open (1800-2200 ET) on ES. I think it presents some low risk trading opportunities.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all I have for now. Stay safe out there!

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Here is an alternative setting for the Early Onset Trend (EOT) in Sierra Chart (roofing filter off). I think I like this one better, as it seems easier to identify the start of the long trend. This essentially the same chart as earlier.



This is probably not the best example of tradable signals, but I just wanted to compare and contrast the two settings.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I had a good trading day (live), but only discretionary. I entered a short MES position last night 3 minutes after open, exited and took a total of 6 round trip trades. My execution was very good on my later trades, but my two earlier exits were poor. My profit taking this afternoon was good with good re-entry points, playing the swings. I used a combination of limit and market orders, with protective stops along the way.

I had to do my grocery shopping first thing this morning, so I missed a good exit when the market rallied a little. Still, all trades were profitable with one open short position (is there any direction you would rather be right now?). All-in-all, I rate my trading a B-, mainly because I left money on the table. I mainly decided to trade because I watched Sunday night gap-downs for the past several weeks. There is no good news around COVID-19 that was going to come out of the weekend. I didn't pull the trigger on prior Sundays and regretted each time. Trading opportunities like this are only several in a lifetime, so I will take them.

I was unable to activate my current MES strategy because a halt on trading (circuit breaker or limit down/up) screws up the calculations until things normalize. There would have been no entries. . Hopefully I can active the strategy, but I have to be sure we don't have any circuit-breaker situations occurring. My strategy is smart enough to not trade when this occurs, but the recovery period after it can be weird. I think it might be ready tomorrow morning.

Have a good evening everyone!

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I missed my update yesterday because I have been busy working. The only disruption from COVID-19 has been that our kids are not in school, so they are home. And the whole thing is a bit distracting.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I ran my MES strategy yesterday and not much happened. There was one stop loss and an additional one small loss, so 0% win rate. It worked, but it did not adapt to the whipsaw. We did some further analysis on the strategy and it appears to work best when ATR is high on a 30 minute chart (>10). Since ATR has been high for the past month, it explains the success in this time period only. In backtest, it did similarly well with high price swings. However, I am pulling the plug on this early, as it will eventually fail once some normalcy comes to the market.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

ATR Revisited
About a year ago, I read an article and promptly forgot to save it. It was about how to use ATR, as described by Cynthia Kase. She is an energies consultant and devised a way of use ATR for stops (Kase's DevStop). I have been searching for it in vain, but finally found a reference to it in Trading Systems and Methods 6e, buy Perry Kaufman.

Here is a link to her article, which I find very interesting and useful:
Setting Stop-Losses Using Price Volatility

We are using some rudimentary ATR stops, but I thing there is a lot of value in what she presents.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Other Strategies
We have a new strategy/system that is ready to trade. Since my wife/partner has developed it, I don't know too much about it, but I will be running it through some tests.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's it for now. I will probably post again tomorrow.


~vmodus

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Not much to report today. I did client work all day, and only spent about 15 minutes looking at 4000 tick charts against a couple of our indicators. I got the idea to look at 4000 tick charts from Linda Bradford Raschke, which she mentions as her preferred chart in her book Trading Sardines. 4000 tick charts are interesting. I will post more on these versus timeframe charts once I have some time to do more compare and contrast. In the meantime, I think I may be able to develop a profitable strategy for MES.

That is all for now. I'm really tired.

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Legendary Market Wizard
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vmodus View Post
I ran my MES strategy yesterday

Stating the obvious this in once in a decade market conditions and I wouldn't read anything into this weeks performance into long term performance. (Good or Bad).


vmodus View Post
ATR Revisited... We are using some rudimentary ATR stops, but I thing there is a lot of value in what she presents.

Assume you saw Kevin's recent video's on this subject

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SMCJB View Post
Stating the obvious this in once in a decade market conditions and I wouldn't read anything into this weeks performance into long term performance. (Good or Bad).

Assume you saw Kevin's recent video's on this subject

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.

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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.

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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.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all for now. Stay safe and I will see you all tomorrow!


~vmodus

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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.

That is all for today. More to come tomorrow....

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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.

To be continued....

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

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.


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  #236 (permalink)
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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.

1 minute, by the numbers:
  • 95 trades
  • 51% win rate
  • 70.63 average trade (wins and losses)
  • $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
The opposite rules apply to a long trade.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That is all for today. I am stacked with client work, so not too much on the trading front.

As always, stay safe!


~vmodus

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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:

Quoting 
Chaos is freedom!

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.

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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.

~vmodus

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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.

The 5 minute chart yielded:
  • 34% win rate
  • $85 average trade
  • 59 trades
  • $1000 stop loss
  • $5017 net gain
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....

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Legendary Market Wizard
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vmodus View Post
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.

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!

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SMCJB View Post
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!


At the start of all this craziness, my wife and I told my 10, 12 and 14 year old our expectations: DO YOUR ONLINE WORK, without Mom and Dad reminding you. So far, so good.

And after Spring Break, the schools are grading them: simply do all the online assignments, get an "A." I've told my 3 that there is no excuse for getting a "B." We are lucky though, none have them have a B yet this school year.

I get the feeling I am very lucky with my 3, at least gradewise!

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SMCJB View Post
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!

Yikes. Our school district is having teachers take attendance. I come from a family of educators and by coincidence one of my largest clients is a school district, so continuing their education is not an option. My sister is an assistant principal of a Title I school in Florida, so she has had to continue working and hand out meals as a 'grab-and-go' site.

From middle school through high school we have 1:1 technology, meaning every kid has a Chromebook. And any kid in elementary school can pick up the technology they need to continue classwork, too. Comcast is offering free hotspot WiFi throughout our area during this crisis, so there is very little excuse for not checking in. Compliance has been pretty good thus far, judging by the attendance in my kids online classes.

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  #243 (permalink)
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kevinkdog View Post
At the start of all this craziness, my wife and I told my 10, 12 and 14 year old our expectations: DO YOUR ONLINE WORK, without Mom and Dad reminding you. So far, so good.

And after Spring Break, the schools are grading them: simply do all the online assignments, get an "A." I've told my 3 that there is no excuse for getting a "B." We are lucky though, none have them have a B yet this school year.

I get the feeling I am very lucky with my 3, at least gradewise!

Ours are 9 and 11. Both have ADD/ADHD and one is on the autism spectrum, so everything is about 3x more difficult. Our son took a quiz today about 5 times to get 100%. He is motivated, but I set the same criteria as you: there is no excuse for 80%. They are coming along.

I gave them 'spring break' the first week of being home, as I knew our district would probably be taking it away (they did). Online learning officially started this past Monday, but other than the first week off, we have kept them busy with a required list of activities, including chores, reading, and exercise.

During the school week (which is usual) we ban video games and they can watch some TV if they complete their school work. Our schools are closed until May 15, though I expect it to run until the end of the school year.

Hang in there friends!

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  #244 (permalink)
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I got nothing profound to say, just the usual, casual comment.

You have a good to read and learn from journal.

From Vix to ATR and fractals, testing of strategies and back and forth between couple of really knowledgeable people on subject. Really nice, I learned a lot in one go so thanks for everyone who were active.

I usually spend 2-3 days on one thread, but yours I read in one go, you can also thank me for adding some 25+ likes and pushing you north of 1k.



I promise I was not stocking just went with the flow

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LastDino View Post
I got nothing profound to say, just the usual, casual comment.

You have a good to read and learn from journal.

From Vix to ATR and fractals, testing of strategies and back and forth between couple of really knowledgeable people on subject. Really nice, I learned a lot in one go so thanks for everyone who were active.

I usually spend 2-3 days on one thread, but yours I read in one go, you can also thank me for adding some 25+ likes and pushing you north of 1k.



I promise I was not stocking just went with the flow

Thanks for sticking with it and all the likes. I retired one journal already, but you probably don't want to go there. I journal to help me see where I have been and share what I have learned and discovered along the way. Yeah, I'm kind of all over the place, but have had some fantastic people help me along the way.

I am constantly learning, so there is just so much that I discover each time I trade, or pickup a book or magazine. As far as I am concerned, I know nothing.

I love your posts over in Funny pic of the day, they always make me laugh. Thanks again!

~vmodus

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SMCJB View Post
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!

It's anecdotal, but my wife said there were only a handful of submissions of classwork in my 9-year old's class this week. So, yeah, about a third.

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Just a quick entry. I decided to write a strategy using the Awesome Oscillator (AO) borrowing the EasyLanguage code from the indicator. It took me about 30 minutes to code and another 30 minutes to test and validate.

Below are the trades generated for this week, using the following criteria:
  • Take first signal of the week
  • Reverse on opposite signal direction
  • No stop loss (just for clarity)

Awesome Oscillator - 60 minute ES


All signals were taken. By itself, AO is not tradable, though it does produce some good signals. I can see where fractals (shown as dots on the top of the chart) could be used for exit points.

That is all for now. More work to be done on these ideas.

~vmodus

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I haven't posted an entry this week, mainly because I have not had much trading activities happening this week. Here are my highlights:

I made Legendary Market Wizard status!


So that was cool to see this morning. I guess I have street cred now.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We bought MultiCharts licenses
Thanks to @ocpb, who let me know about MultiChart's Easter sale, we were able to get a huge discount on licenses. So we spent a couple of days evaluating MC, and then bought 2 lifetime licenses. Now our MC adventure begins. I don't see TradeStation going away, but this will allow us to work with our existing algo strategies with little or no modification, on different brokers.

MultiCharts seems to run our strategies well, but there is a lot of testing to do.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We tested Interactive Brokers
We have developed a strategy for trading forex, so we have decided to setup an account with IB, since TradeStation does not offer forex trading in the US. This is also a great opportunity to have a second broker, so we don't have all of our eggs in one basket.

Looking at IB pricing, they seem to be competitive for forex. So that will be a new facet of our trading business.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I have been doing further research on Bill Williams' various trading methods. I was trying to make sense of his 'balance line' concept. He is not always clear in his definitions, but I believe the balance line is simply a 34 bar smoothed moving average. He has multiple methods for using fractals in trading, but here are two example with the balance line, one long and one short. I was looking at silver in 2018.

Balance Line Trades with Fractals


Further analysis will determine if this is useful. I have noticed that his indicators work better in some market regimes than others. There are a plethora of ways to use the tools, so there is plenty of work to do with this.

I also took a look at the Market Facilitation Index (MFI), but the TradeStation implementation is useless. I don't see a lot of use for the MFI, but this may just be my understanding of how to use it.

That's all. I won't be posting again this week, so I will be back at it next week. Happy trading all and stay safe!


~vmodus

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vmodus View Post
I haven't posted an entry this week, mainly because I have not had much trading activities happening this week. Here are my highlights:

I made Legendary Market Wizard status!


So that was cool to see this morning. I guess I have street cred now.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We bought MultiCharts licenses
Thanks to @ocpb, who let me know about MultiChart's Easter sale, we were able to get a huge discount on licenses. So we spent a couple of days evaluating MC, and then bought 2 lifetime licenses. Now our MC adventure begins. I don't see TradeStation going away, but this will allow us to work with our existing algo strategies with little or no modification, on different brokers.

MultiCharts seems to run our strategies well, but there is a lot of testing to do.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

We tested Interactive Brokers
We have developed a strategy for trading forex, so we have decided to setup an account with IB, since TradeStation does not offer forex trading in the US. This is also a great opportunity to have a second broker, so we don't have all of our eggs in one basket.

Looking at IB pricing, they seem to be competitive for forex. So that will be a new facet of our trading business.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I have been doing further research on Bill Williams' various trading methods. I was trying to make sense of his 'balance line' concept. He is not always clear in his definitions, but I believe the balance line is simply a 34 bar smoothed moving average. He has multiple methods for using fractals in trading, but here are two example with the balance line, one long and one short. I was looking at silver in 2018.

Balance Line Trades with Fractals


Further analysis will determine if this is useful. I have noticed that his indicators work better in some market regimes than others. There are a plethora of ways to use the tools, so there is plenty of work to do with this.

I also took a look at the Market Facilitation Index (MFI), but the TradeStation implementation is useless. I don't see a lot of use for the MFI, but this may just be my understanding of how to use it.

That's all. I won't be posting again this week, so I will be back at it next week. Happy trading all and stay safe!


~vmodus


Try to use the same data for both Tradestation and Multicharts. You can actually drive Multicharts with Tradestation data.

If you have different data driving your TS strats and your MC strats, you will have tons of issues - different signals, different performance, etc.

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kevinkdog View Post
Try to use the same data for both Tradestation and Multicharts. You can actually drive Multicharts with Tradestation data.

If you have different data driving your TS strats and your MC strats, you will have tons of issues - different signals, different performance, etc.

Thanks for the advice. It totally makes sense, since forex data varies by vendor. I know we can use the TS data, but do you know if we can use TS data while also running TS online? In other words, can we connect to the data in Multicharts, while simultaneously running TS?

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vmodus View Post
Thanks for the advice. It totally makes sense, since forex data varies by vendor. I know we can use the TS data, but do you know if we can use TS data while also running TS online? In other words, can we connect to the data in Multicharts, while simultaneously running TS?

~vmodus

Yes, actually I think that is required - run TS and MC simultaneously for real time data.

If it is forex data only you are worried about, I'd probably develop and trade with MC's data.

For futures, I'd use Tradestation's, since you are already paying for it.

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kevinkdog View Post
Yes, actually I think that is required - run TS and MC simultaneously for real time data.

If it is forex data only you are worried about, I'd probably develop and trade with MC's data.

For futures, I'd use TradeStation's, since you are already paying for it.

MC offers free forex data, though we do get that from IB for free as well. My main concern is that we won't have StratOp WFP. As difficult as the program can be, it provides us the best results with respect to optimization. We'll figure it out.

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I was reading Trading Chaos, 1 ed. by Bill Williams last night and had to share this hilarious quote:

Quoting 
The early 1980s produced the $3,000 black box systems, RSI, stochastics, sentiment indexes, and so on. Then Trade Station (sic) and other program developers made back testing and curve fitting a fun project for new traders.


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vmodus View Post
We tested Interactive Brokers
We have developed a strategy for trading forex, so we have decided to setup an account with IB, since TradeStation does not offer forex trading in the US. This is also a great opportunity to have a second broker, so we don't have all of our eggs in one basket.

Looking at IB pricing, they seem to be competitive for forex. So that will be a new facet of our trading business.

If your holding positions over the swap/roll/finance time line - whatever they call it - be careful - they might have great bid-ask spreads but they have some awfully unfriendly interest/swap rates.

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SMCJB View Post
If your holding positions over the swap/roll/finance time line - whatever they call it - be careful - they might have great bid-ask spreads but they have some awfully unfriendly interest/swap rates.

Thanks for the info. Their 'pro' pricing is better than their 'lite', but we don't know what tier we are going to select. We will probably start with lite, just for proof of concept of our strategies and execution. Depending upon our volume, we may need to shop around. Oanda is also an option for us.

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Take for example USD:EUR
If you buy USD sell EUR they pay you 0% on the USD balance and charge you 1.5% Pro or 2.5% Lite on the USD Balance. So you lose 1.5%/2.5% in financing charges.
Now if you sell USD buy EUR they pay you 0% on the EUR balance and charge you 1.55% Pro or 2.55% Lite on the USD Balance. So you lose 1.55%/2.55% in financing charges.
So doesn't matter whether you buy or sell their bid-ask on interest rates is so high that your paying a 1.5% (pro) or 2.5% (lite) financing charge.

The worst example is USD:INR (Pro Rates only)
If you buy USD sell INR they pay you 0% on the USD balance and charge you 12.5% on the INR Balance. So you lose 12.5% in financing charges.
Now if you sell USD buy INR they pay you 0% on the INR balance and charge you 1.55% on the USD Balance. So you also lose 1.55% in financing charges.

The silent way FX Brokers make money!

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SMCJB View Post
Take for example USD:EUR
If you buy USD sell EUR they pay you 0% on the USD balance and charge you 1.5% Pro or 2.5% Lite on the USD Balance. So you lose 1.5%/2.5% in financing charges.
Now if you sell USD buy EUR they pay you 0% on the EUR balance and charge you 1.55% Pro or 2.55% Lite on the USD Balance. So you lose 1.55%/2.55% in financing charges.
So doesn't matter whether you buy or sell their bid-ask on interest rates is so high that your paying a 1.5% (pro) or 2.5% (lite) financing charge.

The worst example is USD:INR (Pro Rates only)
If you buy USD sell INR they pay you 0% on the USD balance and charge you 12.5% on the INR Balance. So you lose 12.5% in financing charges.
Now if you sell USD buy INR they pay you 0% on the INR balance and charge you 1.55% on the USD Balance. So you also lose 1.55% in financing charges.

The silent way FX Brokers make money!

Thanks! So it seems like they don't do normal rollovers like other brokers? They do not have any information, so I understand it as you describe it.

We have found calculating our estimated costs (with any broker) exceedingly difficult, regardless. We are new in forex, though we have been in futures for a very long time and know that cost is only one part of the broker equation. If you have any suggestions around forex broker selection, I'm all ears (eyes).

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I've never traded forex with IB or anybody else, my only experience is with futures. I'd love to try and build a non-correlated carry portfolio but it's not possible if all the FX brokers interest rates are so skewed. (INR lend at 12.5% but pay 0% on deposits!). In theory what IB does (charge margin rates and pay deposit rates) should have the same effect as a broker doing a rollover. The difference being IB does it on a portfolio basis while rollovers are currency pair specific. So theoretically if you bought USD sold EUR, and sold EUR bought GBP, and sold GBP bought USD, at IB your positions would net out and there would be no charges, but at a typical FX broker they would view that as 3 pairs and charge you rollover on each.

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vmodus View Post
MC offers free forex data, though we do get that from IB for free as well. My main concern is that we won't have StratOp WFP. As difficult as the program can be, it provides us the best results with respect to optimization. We'll figure it out.

~vmodus

If the data from Tradestation works with StratOp WFP then why does StratOp WFP not work with the MultiCharts data?

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Hemmo View Post
If the data from Tradestation works with StratOp WFP then why does StratOp WFP not work with the MultiCharts data?

StratOpt WFP is TradeStation only and the license is tied to the customer number. In other words, you cannot run StratOpt WFP without TradeStation. We could, in theory, do the optimization in TS and then move the code to MultiCharts, but instinct tells me we would get different results based on platform difference. However, you make an excellent point and we may look into this. We are in our infancy with MC, so I will add this to things we want to consider.

(I just realized that I have misspelled StratOpt WFP. Oops... my bad.)

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Sorry, there was no journal entries last week, because I am doing almost nothing with trading. This week will be about the same. I should return to regular journaling next week, once the smoke of client work and homeschooling clears.

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Well, not much happening yet this week. I am wrapping up one more big deliverable for a client this week and should be back to trading and algo development by the end of the week.

The one thing that I want to focus on is the use of Bill William's alligator and fractals together. I have three of his books (Trading Chaos 1 and 2 ed., New Trading Dimensions). I can see why his books seem to polarize people. I do not read any of the trading psychology or quantum mechanics, etc, etc, mainly because I go right to the meat of the content. There are some very solid concepts, but I don't think the presentation is great and things are not always well explained or defined. For example, the term 'Balance Line' is used quite often, but may refer to any of the three alligator lines and he is not clear about which balance line to use for a particular method. I am trying to build my own 'unified theory' of how to use his various methods and tools to come up with trading.

On the surface the alligator is simply three smoothed moving averages based on bar lengths of three Fibonacci sequence numbers: 13, 8, and 5, offset by 8, 5 and 3 bars respectively (also Fibonacci sequence numbers). The use of Fibonacci sequence numbers is based on their own analysis and finding that these are significant with respect to price movement. If you are a number theorist or physicist, this probably appeals to you and you probably agree with Williams. I am neither, but I will go along for the ride. The alligator is a special kind of 3-line moving average, and let's leave it at that.

The fractals are essentially highest highs or lowest lows (highly simplified explanation) with two bars on either side, offset by one small point/pip/tick (+1 long/-1 short). I'm not sure fractal is a mathematically correct term for this, but again, I'm along for the ride.

Alligator and Fractal


So this is what I am looking at right now. I have Williams' Awesome Oscillator and Ehler's Even Better Sinewave, just for reference. The Awesome Oscillator (AO) is less than awesome in consolidation, but as I think I noted from earlier testing and analysis, AO is not a stand-alone tool.

The above chart is the MES 30 minute chart, but I like how this looks for Silver, too. Once I can do some more manual analysis, then maybe I can code it to see what I can come up with.

That is all for now. I hope to have another update Thursday.

Stay safe out there!

~vmodus

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vmodus View Post
Alligator and Fractal

I want to clarify one thing on my chart. The alligator's 'mouth' is open when the red line is between the blue and green lines. That is when the alligator feeds and you are supposed to take trades.

That's all.

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I want to trade!

I have been very busy with client work, busier than I want to be, so I really have had no time to do much in the way of system development. To save time, I will just say have a great weekend to all and I will return to this journal Tuesday after the US Memorial Day holiday.

As always, stay safe!

~vmodus

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Hi. Thank you for your journal.

Bill William's books. I have read it a long time ago. Also tested his methods using different instruments. If I remember correctly, method only worked for trending stocks and futures. Didnt he also use many 90s stocks as example in his first book where market had rallying?

It was interesting concept to apply chaos theory but my findings were unsuccessful. Just sharing and hope you can come up with better result than I did.

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kanepa View Post
Hi. Thank you for your journal.

Bill William's books. I have read it a long time ago. Also tested his methods using different instruments. If I remember correctly, method only worked for trending stocks and futures. Didnt he also use many 90s stocks as example in his first book where market had rallying?

It was interesting concept to apply chaos theory but my findings were unsuccessful. Just sharing and hope you can come up with better result than I did.

Thank you for your kind words. William's last book, Trading Chaos 2nd Edition, was co-authored with his daughter and published in 2004. I don't really consider it a second edition, but a continuation of his ideas. I don't really focus on the philosophical or meta-physical aspects of his writings, but jump right into the meat of it.

We have been able to integrate some of his ideas into our trading, most notably fractals. I have a number of trading ideas based on Williams' concepts for algo strategy development that are currently backlogged. The next thing I will get to is alligator + fractals, as I noted in one of my most recent posts.

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I'm back!

I have been sitting on this entry for a couple months, since the April 2020 issue of TASC was published. The article On-Balance Volume Modified (OBVM) caught my eye, as it was exactly what I was trying to do when I developed my On-Balance Volume SuperSmooth back in January (see: https://futures.io/trading-journals/46621-attack-robots-algo-journal-16.html#post770898. The main idea we both had was to smooth the OBV and indicate market direction change.

The article uses two lines, but I actually like to use a single changing line because it is easier to see change, so I modified their code so that I could compare with my smoothed OBV. Here are the results on a 60 minute silver chart, using similar parameters (7 bars, red=bear; yellow = bull):



In this chart, the OBVM produces fewer signals and it seems to detect changes one bar earlier. The trade-off is some chop.

What's the point?
There are several points. Firstly, I found it interesting that someone else was thinking about smoothing OBV as I did (different methods, but same idea). Secondly, it is useful to compare and contrast similar analysis methods. I will probably compare trading results of these two indicators to see if one performs better than other (simple crossover entries) over a longer term.

If you subscribe to TASC, you can find the code to OBVM here (April 2020; Trader's Tips): Back Issue Archive

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's all I have for now. I have a Strategy Club submission to finish up (Natural Gas) today and transitioning from client work back to trading.

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I have been extra busy trying to code my latest strategy idea and see if it is feasible and will pass our Strategy Factory process. The big idea, which I have touched on in prior posts, is using fractals for counter-trend trades, reversals, or breakouts.

The rules are: if price touches a fractal high and the alligator is below the fractal high, then take a long position. Opposite for short positions (using fractal low).

Coding it was tricky, since the Alligator is offset 8, 5, and 3 bars into the future. Rather than trying to explain it, Sierra Charts shows the projected bars in the future (and I'm not sure they have it properly implemented, but that is not our concern here):

Alligator on Sierra Charts - Future Bars


I made the mistake, as some others before me, in thinking that the Alligator was simply three smoothed moving averages. The offset is what makes this a unique indicator. It took me a while to wrap my head around how to code it, but it ended up being pretty easy when I put pencil to paper (literally).

I have been using a silver chart for development purposes, and below is what I expect the strategy to do:


I was able to watch the short position unfold perfectly as I was coding (I was actually looking at a tick chart, but the 60 minute chart shows the same basic move). I had to resist the temptation to trade this and stick to developing the strategy. Anyhow, the fractals are used for classic support and resistance, with some reinforcement using the Alligator to avoid some bad trades.

I am not sure what will come of this in the end, but almost everywhere I apply this concept (manually), it seems to work well. I have the long side coded and functioning perfectly, but the short side is not taking trades. I should have that worked out later today.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Strategy Factory Club
We submitted a new strategy to the club for June, a natural gas strategy. We skipped the May submission, as the strategy we developed did not pass the criteria for entry. We have our April heating oil strategy that tanked the first month, due mainly to the bottoming of the oil market. It has made a nice recovery since then, so we shall see if it ultimately passes the six month test.

The main purpose for submitting to the club, for us, is not getting strategies from others (assuming we pass), but the exercise and discipline of developing, testing, and incubating strategies. We have learned a ton about the process from Kevin Davey just by participating. Hopefully our process (a modified version of Kevin's) is solid and continues to mature as we use it.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's it for today! Happy trading all and stay safe (in every way).

~vmodus

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Strategy Factory Club
We have our April heating oil strategy that tanked the first month, due mainly to the bottoming of the oil market. It has made a nice recovery since then, so we shall see if it ultimately passes the six month test.

Correction: our April strategy is crude light, not heating oil. I was confusing with a heating oil strategy we developed at about the same time.

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I was able to finally get the strategy I coded, as I described yesterday. So there is good news and bad news.

The Bad News
It did not perform very well. Pictures are more poignant than words, so here is and equity curve for Silver, 1024 tick bar, from Dec 9 2019 - Jan 31 2019:



It does not look good in nearly any timeframe or tick chart. ES, SI, and EC (Euro FX) all have similar outcomes. I only have two possible parameters to optimize, but really only one practical parameter (stop loss). I would be tempted to start fiddling with the strategy, but I fear curve fitting.

One additional thing that I don't like is that the efficiency (a measure of exits) runs at about -25%. That is, as we say, butt-ugly. We like to have our efficiency at over 10%. 100% efficiency would be getting out at every top or bottom. This is what YM looks like for a 2 year period, 60 minute chart:




The Good News
There are several pieces of good news:
  1. It works!
  2. The fractal calculations I used are not 100% accurate; I noticed that several were incorrect, which affects the performance. I can fix and retest, though I don't think it will help that much.
  3. I was able to get my stop orders working, at least for backtesting; this is hugely important to me for fractal work.
  4. All entries and exits are accurate.
  5. I have a baseline for the other fractal and alligator ideas I want to try.
So I have a great starting point for the other fractal work. This was one idea and it works well sometimes and leaks money at other times.

Next steps:
  • Fix the fractal calculation
  • Scrap this idea, document results, and move to the next idea

~vmodus

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Fractals Rebooted

Yesterday I noted an issue with our fractal. We were using the same calculation in this post (the 'Fractal Patterns' code): https://futures.io/tradestation/47595-williams-fractals-tradestation.html#post728498. This is, unfortunately, an oversimplified version, even if it was provided by Bill Williams. If you want to geek out, it is shown in Trading Chaos 1st ed. p. 147, or Trading Chaos 2nd ed. p. 138.

There may be more than 5 bars involved, and this is where the TradeStation Fractal ShowMe comes into play (ShowMe is a type of indicator that paints things on the screen, like dots, etc.). The correct code, which I verified against the books, is shown later in that post. Not to worry, of course I just took the ShowMe code, created a function.

When I replaced my old fractal calculation with the new (correct) function, it performed about the same, on balance. So now I have the correct fractal calculation, with about the same net results.

There is one thing that I do not have in my fractal alligator strategy, but is a mainstay: exit all positions at end of week. A lot of trades I take are intraday swings and I never trade the daily charts. When working with fractals, I like to reset every new week: wait for the first high and low fractals to establish themselves before starting to trade. This strategy I have been testing does not have the end-of-week criteria, and considering some of the gap downs we have seen in a lot of instruments since February, it has skewed the results.

Regardless, there is plenty to like and dislike from my current approach. No pictures for this entry, sorry about that.


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Getting Better

This is my same Fractal-Alligator strategy, on RTY. Both the equity curve and the efficiency has improved. This is with no optimization and no stop loss:

Equity Curve


Total Efficiency


I like the fact that this requires little to no optimization. I have the option built-in to allow a stop loss, but I have found they don't really improve equity curve very much, based on our entries and exits.

Still more work to do....

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Fractals Rebooted

Yesterday I noted an issue with our fractal. We were using the same calculation in this post (the 'Fractal Patterns' code): . This is, unfortunately, an oversimplified version, even if it was provided by Bill Williams. If you want to geek out, it is shown in Trading Chaos 1st ed. p. 147, or Trading Chaos 2nd ed. p. 138.

There may be more than 5 bars involved, and this is where the TradeStation Fractal ShowMe comes into play (ShowMe is a type of indicator that paints things on the screen, like dots, etc.). The correct code, which I verified against the books, is shown later in that post. Not to worry, of course I just took the ShowMe code, created a function.

When I replaced my old fractal calculation with the new (correct) function, it performed about the same, on balance. So now I have the correct fractal calculation, with about the same net results.

There is one thing that I do not have in my fractal alligator strategy, but is a mainstay: exit all positions at end of week. A lot of trades I take are intraday swings and I never trade the daily charts. When working with fractals, I like to reset every new week: wait for the first high and low fractals to establish themselves before starting to trade. This strategy I have been testing does not have the end-of-week criteria, and considering some of the gap downs we have seen in a lot of instruments since February, it has skewed the results.

Regardless, there is plenty to like and dislike from my current approach. No pictures for this entry, sorry about that.


~vmodus

Hello vmodus. Not sure if this will help depending on how many trades you take a day... but one the most amazing discoveries I made when, testing mostly breakout strategies, but it worked on alot of strategies as well was exiting EOD. Especially as a good base to test other exits against. Simple but if you run all your entries ect the same but test what the comparison to ending at the EOD and current exits you might be surprised.

Maybe you tried or you know. Not sure.

Just trying to be helpful. Hopefully it's something you can test.

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Hello vmodus. Not sure if this will help depending on how many trades you take a day... but one the most amazing discoveries I made when, testing mostly breakout strategies, but it worked on alot of strategies as well was exiting EOD. Especially as a good base to test other exits against. Simple but if you run all your entries ect the same but test what the comparison to ending at the EOD and current exits you might be surprised.

Maybe you tried or you know. Not sure.

Just trying to be helpful. Hopefully it's something you can test.

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Hello Sandpaddict. Thanks for sharing the post, but yeah, I've been there already. We have already used this post as reference, but I have moved on to the calculation in the TradeStation ShowMe, as the simpler calculation (my wife/trading partner uses the older one successfully). I am guessing the older calculation was provided to students of his Profitunity training courses.

In any case, I was testing a strategy for the past 24 hours which had way too many trades. I have to fix the entries and exits, as my logic is messed up, but I have at least a dozen different strategy ideas just from what I've learned and observed from fractals. One thing is certain, up to this point, is that EOD and EOW exits are best. Reset the fractals every new day/week and my strategies track well.

Thanks again!

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Hello Sandpaddict. Thanks for sharing the post, but yeah, I've been there already. We have already used this post as reference, but I have moved on to the calculation in the TradeStation ShowMe, as the simpler calculation (my wife/trading partner uses the older one successfully). I am guessing the older calculation was provided to students of his Profitunity training courses.

In any case, I was testing a strategy for the past 24 hours which had way too many trades. I have to fix the entries and exits, as my logic is messed up, but I have at least a dozen different strategy ideas just from what I've learned and observed from fractals. One thing is certain, up to this point, is that EOD and EOW exits are best. Reset the fractals every new day/week and my strategies track well.

Thanks again!

~vmodus

Great can't wait to see how it goes. Keep up the good work.

I know what fractals are. Not sure what your referring to. Im guessing its the swings within swings?

Pretty cool you both trade. Anyway good reading.

Thank you vmodus

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Great can't wait to see how it goes. Keep up the good work.

I know what fractals are. Not sure what your referring to. Im guessing its the swings within swings?

Pretty cool you both trade. Anyway good reading.

Thank you vmodus

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I'm sorry, I wasn't clear. I am referring to the two different calculations in the post you referenced. The Profitunity code only looks at 5 bars. Example:

Profitunity Code


The TradeStation code, which matches the descriptions in Williams' books, will use as many bars as needed to determine if a fractal formed. In the example below, there were two consecutive highs with the same value. So the code needs to look back to additional bars.

TradeStationCode


When my partner started exploring fractals, she used the example in that post (the old code). It worked for her in her strategy, so she stuck with it for that application.

We are moving slowly to MultiCharts, so the TradeStation code won't work, as it uses vectors. MC has their own fractal calculations using swinghigh/swinglow and Pivot functions, so I will have to confirm that they follow the books.

More on fractal adventures later this afternoon.....

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I'm sorry, I wasn't clear. I am referring to the two different calculations in the post you referenced. The Profitunity code only looks at 5 bars. Example:

Profitunity Code


The TradeStation code, which matches the descriptions in Williams' books, will use as many bars as needed to determine if a fractal formed. In the example below, there were two consecutive highs with the same value. So the code needs to look back to additional bars.

TradeStationCode


When my partner started exploring fractals, she used the example in that post (the old code). It worked for her in her strategy, so she stuck with it for that application.

We are moving slowly to MultiCharts, so the TradeStation code won't work, as it uses vectors. MC has their own fractal calculations using swinghigh/swinglow and Pivot functions, so I will have to confirm that they follow the books.

More on fractal adventures later this afternoon.....

~vmodus

Got it. Makes sense.

Curious. Have you tested the difference counting that as ONE fractal high vs adding more bars behind? Again just curious?

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Renko Experiments
I have been doing some experiments over the past few days, to see what I could do with Renko charts and Fractals. Renko bars are difficult to work with, algorithmically speaking, but I will not go into that here. We will just pretend we are discretionary traders for the moment.

I wanted to apply the Fractal and Alligator ideas to a Renko chart and see how they performed. Although I have an algo written to do this, I like to do it manually to really get a deep understanding of the process. And the algo isn't bug-free yet.

I took a 23 hour period of both ES and RTY, from Sunday open to Monday close. I used the following Renko settings in TradeStation:
  • ES: 1.25 / tick
  • RTY: .5 / tick
ES did well for the day (+$1095 after commission and slippage), but RTY was a mess (-$55 net; but 82 trades ). Even though both are essentially set to 5 tick bar sizes, RTY had at least 8 times the number of fractal signals. Widening the bar helped somewhat, but it was still all over the place.

Next Experiment
We have been playing quite a bit with MultiCharts, so I wanted to spend a little more time getting acquainted. So I decided to take ES and do the same manual analysis, but using MultiCharts' fractal.

Why do an experiment? MultiCharts has one distinct advantage over TradeStation (well.... more than one, but let's not go there): Renko bars can be rendered with no synthetic or 'phantom' data/bars (if you like them, you can enable them). TradeStation has no such option. Cynthia Kase makes a great argument against Range Bars for the same reason, preferring her own home-brew Kase bars based on ATR. The two charts below are from the same time period:

TradeStation - Phantom Bars


MultiCharts - No Phantom Bars


The advantage is useful in backtesting, etc., but I will not get into details or discussion regarding Renko and automation. That is a whole different set of posts. Again, we are pretending we are discretionary traders.

A refresher on the rules:
Long:
- Fractal High > all Alligator lines
- Price breaks through Fractal High price

Short:
- Fractal Low < all alligator lines
- Price breaks through Fractal Low price

$30 per round trip for slippage and commission; no stop loss or profit target

The differences between the two were very, very interesting. MultiCharts fractals are not perfect, and I will have to recode them myself. But here are the results of the two systems:

ES Fractals and Alligators - MultiCharts versus TradeStation


I expected maybe a 10% variance. I got a 100% variance, MultiCharts over TradeStation. One less trade on MultiCharts. I don't know why the difference is so great. but as my partner tests her own strategies on MC versus TS, she is seeing similar things. It may have to do with the phantom bars (there was only one gap yesterday, as seen above). In fact, as I write this, it may very well be that, due to bar building......

Enough for now. I have some client work to catch up on. See you on the other side of tonight!


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Got it. Makes sense.

Curious. Have you tested the difference counting that as ONE fractal high vs adding more bars behind? Again just curious?

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Sorry, I missed your question the other day. Just using Fractal High (for simplicity), the rules state that the high must be followed by two lower highs. If you have two or more highs that are equal, then you only consider the latest high. So you need two bars before the fractal high with lower highs and two bars after the fractal high with lower highs. Here are a few examples from Trading Chaos, 1 ed. (excuse the crappy scans):

Initiating Fractals


A: Fractal High
B: Fractal High and Low occurring on the same bar
C: Fractal High followed by a Fractal Low
D: Fractal High followed by an equal high

Fractal Examples


I like your questions. It helps my understand the process more if I can explain it to someone else (even better if they understand ).

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RTY with Renko
Although I have been busy juggling client and trading work, I had a little time to do some analysis on RTY, similar to what I did yesterday with ES. I took a 23 hour period, but this time I used a 10 tick brick size (or 1 brick size, in TradeStation, against the same period as ES (Sunday open to Monday close).

Here is what I got, using the same entry and exit rule, no stop loss or profit target, and $25 slippage and commission (roundtrip):

RTY Renko 10 tick bar - TradeStation versus MultiCharts


I don't know what this means. -$10 versus $3700? WTF? I really don't know what it means. I'm not excited, I'm just confused here.

Next steps on this idea:
  • Compare TradeStation bars with MultiCharts bars and how they may vary;
  • Update my TradeStation strategy to match what I have been doing manually;
  • Convert this strategy to MultiCharts and see what I can do with it.

The big challenge will be understanding how to code this in PowerLanguage, MultiCharts development language. The fractal indicator doesn't work properly (at least for Renko charts) and the functions it calls, as noted yesterday, don't quite work. As it usually goes, I will probably have a breakthrough on Friday and have to wait all weekend to until I can full test my idea.

Anyhow, more work to be done.


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Sorry, I missed your question the other day. Just using Fractal High (for simplicity), the rules state that the high must be followed by two lower highs. If you have two or more highs that are equal, then you only consider the latest high. So you need two bars before the fractal high with lower highs and two bars after the fractal high with lower highs. Here are a few examples from Trading Chaos, 1 ed. (excuse the crappy scans):

Initiating Fractals


A: Fractal High
B: Fractal High and Low occurring on the same bar
C: Fractal High followed by a Fractal Low
D: Fractal High followed by an equal high

Fractal Examples


I like your questions. It helps my understand the process more if I can explain it to someone else (even better if they understand ).

~vmodus

Ya example "F" is what I was reffering to

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I Heart MultiCharts
To wrap up the week, I figured I would throw some love to MultiCharts. The more I use this application, the more I like it. My wife likes to have YouTube and TED talks on while she works. I like to have Chart Playback in MultiCharts running. It is like watching a movie. I will record a short session of playback, maybe next week, to describe what I see with Fractals and Alligators on Renko charts.

As noted earlier this week, MultiCharts Renko bars are more useful for us than TradeStation, mainly because of the 'hide phantom bars' option. One of the potential issues with TradesStation's Renko bars is that if we have an automated strategy, the trading results will probably never match the strategy. What this means is that backtesting is difficult, if not impossible. More on this in a later entry.

What I find with MultiCharts is that it has the best of both Sierra Charts and TradeStation: speed, stability, user interface, and tools. So I heart MultiCharts.

Fractals in MultiCharts
Right now I am struggling with the provided Fractal indicator in MultiCharts. I need to write my own version, as it does not work quite right on Renko Charts. I wanted to do it today, but I had an issue with a client that I really struggled to resolve. This will be my first official foray into PowerLanguage. The EasyLanguage code does not work in MultiCharts, mainly because it uses a function called Vector.

I was able to do some very interesting tests, particularly on Wednesday, which should have been a bad day, but did okay using my Fractal/Alligator combo.

That is all for the week. I will update my progress on the Fractal development once I get to it. Have a great weekend everyone!

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Breakout
I have been working through my fractal-alligator strategy and I had a breakthrough Sunday, with respect to MultiCharts (MC), but then with TradeStation (TS). The cool thing about working with both is that I can develop code in one and port it to the other, for the most part. So I found that the fractal indicator in MC (ABillW_ActiveFractal) is wrong, at least for Renko charts. I found another one called Chaos Fractals, by happenstance, which was a very fortunate thing. Within an hour I was able to validate it against Renko charts in MC, then port the PowerLanguage back to EasyLanguage and test in TS. It worked great!

I then created a function from the indicator, used it in my fractal-alligator, and voila! It worked great, too! I was able to do this all in less than an hour, which was good, because it was Sunday and beautiful outside, and perfect for a day out with the family. And aside from my son nearly breaking his leg, it was a wonderful day.

Below is a chart with fractals, the alligator teeth (green line), and strategy trades. All trades shown below are getting executed as programmed:

Renko on TradeStation with Alligator Teeth and Fractals


Can we trust our indicators?
Going through this, it begs the question (of any platform anywhere): can we trust our indicators/studies? I have three different fractal indicators that give me three different results, at least on Renko charts. I think, after my experience with fractal calculations, that I need to adopt Reagan's approach to Soviet nuclear disarmament: trust, but verify. I think it is a useful exercise to verify the indicators we use. As algo system developers, I think it is doubly important. If nothing else, it allows us to understand the nuances of an indicator. We may even find the occasional edge.

Forward Testing and Equity Curve
Right now, backtesting is useless, since we are almost 6 months into the COVID-19 situation and getting data further back is difficult (Renko is built on ticks). For proper backtesting, we need more data, but historical tick data is pricey, so we have to choose wisely.

Here is the equity curve for ESM20:



Drawdowns are big, with the largest here of about $2k. This is not an ideal equity chart, but shows some of the price volatility we have had recently. NQ looks about the same.

I have been forward testing in sim and comparing the results to my strategy performance reports. I have been able to work out some potential issues. One issue I had was that TradeStation flaked out on me early this morning and got stuck loading data, so a number of trades were missed.

Next Steps
  • Continue forward testing in sim and validating the strategy performance reports against the trades.
  • Test additional bar sizes
  • Test the strategy on Forex in MultiCharts
  • Add EOW and EOD exit criteria (I don't hold positions over the weekend or overnight for this strategy)
I had some bugs that I was able to resolve over the past couple days. There is still a lot of work to do, but progress is being made.

Have a great day!

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Oh yeah, one more thing to do: look into some better exits when the market turns. Kevin Davey has one in his book Entry and Exit Confessions of a Champion Trader, that I think I can adapt to my strategy. It exits after n-bars in the opposite direction. I have my own twist on that idea, but I won't know it until I try it.

That's all!

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Testing and More Testing
I have been juggling client work and strategy development. The main thing I have been working on is my fractal-alligator strategy. At this point of my system development there are a few new things that I want to add, but for now I am incubating this strategy on a number of different instruments (ES, NQ, GC, and SB). Here are a few things that I have learned:
  • A strategy needs to run and be left alone. This may be self-evident, but with TradeStation, it is not necessarily a reality. I have had 4 crashes, mainly when I load a new chart, add an indicator, or strategy. This hosed some of my results.
  • Constant restarts and resets will affect my P&L. I had both positive and negative mistakes.
  • Do not try to correct a missed entry; reset and move on. I made an error that was a -$700 mistake because I tried to correct an entry. The mistake was, thankfully, on paper. Still, I can see these errors in my sim balance, which is useful to know, understand, and improve.
  • Lower timeframes/bar sizes create tons of extra trades; this is also pretty obvious, but what is not as obvious is the end result (see my charts below)
  • I need a checklist for going live with a strategy and maintaining it. All of the errors I made this week are correctable with a process.
Here are a couple of equity curves, if everything had executed perfectly (one is ESU, one is ESM, but the results were close enough across the two contracts). We currently do not optimize any parameters. Note the peak-to-valley drawdowns of $3k-4k or so.

Short Timeframe


Long Timeframe (2 times longer than the one above)


Which is better, shorter or longer timeframe? It is a matter of preference. My partner prefers fewer trades and lower drawdown; I can accept more trades and a larger drawdown. Some Monte Carlo analysis on our walkforward trades should yield some interesting results. This was an unusual week, but it has been an unusual year, too.

Yeah, the curves look lovely, but I know our actual results would have been different. I hate missed opportunity as much as the next person, but I am a big picture kind of guy. I won't trade a half-baked system that has not been fully tested and passes our criteria.

Next Week:
  • Start strategy on Sunday night and let it run, no interruptions;
  • Add EOW code to my strategies;
  • Analyze execution against strategy reports;
  • Analyze historical P/L by entry times (overnight trades have been good this week)

Have a great weekend everyone, and stay safe!

~vmodus

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Here are a couple of equity curves, if everything had executed perfectly (one is ESU, one is ESM, but the results were close enough across the two contracts). We currently do not optimize any parameters. Note the peak-to-valley drawdowns of $3k-4k or so.

Short Timeframe


Long Timeframe (2 times longer than the one above)


Which is better, shorter or longer timeframe? It is a matter of preference. My partner prefers fewer trades and lower drawdown; I can accept more trades and a larger drawdown. Some Monte Carlo analysis on our walkforward trades should yield some interesting results. This was an unusual week, but it has been an unusual year, too.

~vmodus

I was thinking about these two equity curves over the past two days and have an additional observation. The shorter timeframe was half of the longer timeframe (factor of 2, if you will), but the number of trades is 4 times greater. So the number of trades was exponentially greater on the shorter timeframe. That is just interesting to me and maybe not significant.

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Il buono, il brutto, il cattivo
I setup my strategies to run my fractal-alligator strategy last night in simulation, trading ES, and I had a little bit of the good, the bad and the ugly, in no particular order. The plan was to start the chart data on Sunday, and wait until the first fractal high and low formed before trading. However, even after they formed (in my mind), they did not show on the chart, nor did any trades occur (which is good because the indicator should match the strategy lock-step). I had to include Friday data, which I was trying to prevent, but that fixed it. Apparently the fractal indicator needs a lot of bars. So that idea failed, but now I know what I can and cannot do. That was the ugly.

The purpose for setting up my chart as such was to prevent a phantom bar fills in the case of a market gap, which it did on open. The idea failed, so I will just set my first chart day to be the Friday before.

Il brutto
The bad was that once I fixed that little problem I noticed that my first trade wasn't taken. Since I have a rule to never enter a trade late (i.e. if I miss an entry, too bad, wait for the next signal unless it comes back to my entry price and the signal is still valid). So I missed an $800 win last night. The cause? TradeStation wasn't calculating the strategy on that workspace. There was no reason for it, as I had the same strategy on a different workspace and it was just fine. So I had to shut down TradeStation and restart it. That fixed the problem. But losing an $800 win was annoying.

So the TradeStation fail was bad.

The other bad was a loss on a long-to-short reversal. It was only a temporary pullback, so we gave back more than I would have liked.

Il cattivo
There were several 'goods':
  • The strategy entries matched the sim trades, except where the trades were missed as noted above;
  • Strategy was profitable today, even without that missed trade above;
  • Simulation is matching, within a point (+/- 1), what it should;
  • There were very few trades (5 round trip; one open position at close);
  • It just works.

Those are the good. Hopefully we can add this to our inventory of working strategies. I am currently doing some testing on other instruments and see potential in metals.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

My next experiment will really be analysis. I am going to attempt to do some profit curves with (hopefully) non-correlated instruments. I am trying to apply something I learned about diversification from Kevin Davey's Strategy Factory course, but with our own strategies.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

No pictures today, maybe tomorrow. I expect things to be a bit smoother over the next session. Incubation continues.

~vmodus

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Mostly Good
Today was mostly good (when I refer to 'today', I am generally saying from market open, so last night and today). I had another profitable day in simulation, but we are testing this strategy live against the micros and they are performing well. Here is the trading report (ESU20:



Today's results (sim trading):
  • +$1402 closed profit (I know it doesn't match the above report; this is from the broker trade results and has some trades missing from the report)
  • $988 open profit position at close ($697 minimum profit, with my current stop placement)
One of the metrics that I use is the number of winning series versus losing series. A series is how many consecutive wins or losses you have in a row before the next loss or win, in other words, a winning or losing streak. If there is a balance between the Winning Series and Losing Series, and the number of series are distributed about evenly over a large number of trades during backtesting and walk-forward testing, then the strategy has a greater likelihood of success. Here is one example of a strategy I have that meets the criteria:



There are more important metrics than this one, but I have found value in it.

Don't Fix it if it Ain't Broke
I have a little more work to do on this strategy, primarily setting the end of week exit, which is mainly there for backtesting purposes more-so than unattended trading. I would also like to improve the exits, as I noted in an earlier entry. Right now efficiency, which is a measure of the efficiency of an exit or entry, is between -10% to -5% in backtesting, and between -4% and 0% during sim testing. I like for this particular metric to have at at least 10% efficiency. I am almost hesitant to touch it, since it is working and I don't want to break it. At some point, we will have a code freeze, probably sometime this week.

Knowing me, I would break it and all that work would be down the drain. At least my wife/partner keeps me honest on such things. Good thing I backup daily.

Oddities and Execution
One of the reasons for running in sim is to work out any procedural or execution issues. There are some things to think about:
  • How do I set up my chart for trading on Sunday night?
  • How do I deal with phantom orders?
  • What happens if I reload my chart?
  • What happens if TS crashes?
  • What happens if my PC crashes?
  • How do I restart my strategy and ensure it is synchronized?
That is just a sampling, but it is important. These oddities can have a seriously negative impact on trading. Even more importantly, it can nullify an entire test. As noted yesterday, just a simple error setting up the chart could have cost me $800 in missed revenue. Last night I caused two additional buy orders (in my favor at least), because of an incorrect TradeStation setting and my stopping and restarting the strategy a couple times.

So simulation for me is rehearsal and practice, rehearsal and practice. It is one thing to make psychological errors in trading; it is entirely another thing (and frankly unacceptable), to have execution errors. So deliberate practice is what I am doing.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I fear that the rest of the week will be more of the same. I do not want to start development on any new strategies right now, as I have several tradable strategies. I am spending a bit of time with my kids, holding 'Dad Camp' most days. For now, I will just work with my strategies, continue organizing my office, and wrap up some client activities.

I hope to do some work on combined strategies sometime tomorrow. Check back in for that bit of fun.

See you on the other side of midnight!

~vmodus

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  #289 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
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Fistful of Dollars
Yeah, somehow I'm stuck on Sergio Leone references this week. Anyhow, I ran another day of sim for my strategy on ES. It was another successful day, though it gave back a bit in the mid-afternoon. So I'm convinced, with the testing I've been doing in sim and my wife/trading partner has been running it live (different context, but same results), to go live with this on micro e-minis.

Go Live
So yeah, that's it. One of the criteria for us to go live was the matching of the strategy report (perfect world), sim (executed orders in the sim account...not perfect, not ideal), and live orders. We were able to track each of these three and the all follow pretty closely. One of the challenges is that we are using, when it comes down to it, tick-level data. With TradeStation, we only have 6 months of data available. So we had two choices:
  1. Purchase or lease data going further back
  2. Run live with micro e-minis
We went with #2 because we will know, within a dozen trades or so, if our strategy is bunk or not. This is not how we normally roll. We go back 10 years, typically, to verify our strategies are robust over all types of market regimes. For now, the micros are a blessing, because the offer a low risk test bed in a live environment.

I started the strategies and they are now running. I will monitor, but I turned off my status bar. I cannot let myself be swayed by the small movements or the current P/L. I have catastrophic stops set, there is no optimization to be done, just set it and check it once in a while.

End of Week Exits
I finally got around to coding the EOW exits, which are unique for the strategy (I have other EOW exits, but they don't work here). I ran into a bug, I think, but I found a workaround.

When using the Time attribute (this is the bar close time), this piece of logic does not work. The variable Exit_Time might = 1645 or something like that.

This doesn't work:
 
Code
If Time >= Exit_Time then...
This works:
 
Code
If Time >= 1645 then...
And this works:
 
Code
If Exit_Time <= Time then...
WTF? It makes no sense, thus I think it is a bug. Whatever, I coded around it and now it works with the variable. So that was annoying.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I have something I want to post tomorrow, if possible. It feels like Thursday, but it's only Wednesday. Have a good night y'all.

~vmodus

WTF = What The Freak, according to my son.

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  #290 (permalink)
Legendary Systematic Algo Trader
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Experience: Intermediate
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Go Live
I went live last night with my latest strategy and all went as expected. I don't discuss actual P&L, so I think it is fair to just indicate if my strategy was profitable/not profitable for the day, and overall for the week.

Today's Results (live)
  • Positive P&L at close, trading MES and MNQ (1 contract each)
  • One open position in the green at close
  • 33 round trip trades
  • 39% profitable
  • Overall profit factor 1.29
  • System efficiency: 3% (better than testing)
  • Execution errors: zero
It was a good trading day, despite the lower profitability (we track about 48-50%). The best part: my system was full auto, no intervention required, no crashes, etc. The large number of trades

The Bad
I noticed on one of my trades that there was a some slippage of a few ticks. It was a one-time thing and did not affect overall performance, but I will keep an eye out for this. For the most part, slippage is almost a non-factor due to the use of stop orders (I have some positive slippage, too), though I always include it in my testing.

The other bad, which is not really bad, but not ideal either, is that I'm trading MNQ and MES at the same time, so there is a lot of correlation. My data package is pretty limited, but I will expand it in July and thus the instruments I can trade. I will likely look at micro gold and micro CL as a couple of candidates.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I worked a little on portfolio diversification today. It is very strange... I never thought I would be at this point. As I figured it, I would run a strategy or two on a favorite instrument, and that would be it. After taking the Strategy Factory course, I realize that I need a basket of instruments and strategies, preferably non-correlated. So my thinking right now is around how we are going to allocate funds to specific instruments and diversify. After a very, very long time and a lot of hard work, it is finally nice to have these kinds of problems.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Next Steps
Assuming that I can be consistently profitable, I have some goals, both long and short term:
  • Daily goal: Execution is perfect
  • Weekly goal: Positive P&L (on other words, consistent profitability)
  • Monthly goal: cover all costs (data, platform, and fees)
  • Longer term goal: recovery to do from some drawdowns dating back to last year
The account I am trading is actually custodial, so I have a lot of time and flexibility on my hands with this.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I stumble across this post from Big Mike earlier today: June Charity Fundraiser - Feeding hungry families (2020)

I've seen this kind of thing first-hand before and we have a man on the ground who can make a difference. I appreciate Big Mike's transparency. Donate if you can....

That's all for now. I hope to have the diversification study done by tomorrow. For now, have a great evening everyone!


~vmodus

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  #291 (permalink)
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vmodus View Post
Go Live
For the most part, slippage is almost a non-factor due to the use of stop orders (I have some positive slippage, too), though I always include it in my testing.

Nice progress, great to see!

I'm curious about your statement. Stop orders are really just market orders as far as the exchange goes. I have always seen slippage with them.

Maybe you are calculating slippage differently?

I calculate slippage as the difference between my actual fill and the strategy engine fill.


Some of my results (all market or stop orders):

For MES, last couple of weeks

I assume $1.25 per side slippage for MES

Average actual slippage based on 272 trades: $0.81 (or 65% of planned slippage - which is good!)

22% of orders had positive slippage
5% had $0 slippage
73% had negative slippage, as much as 8 ticks


Maybe I am doing something differently than you?

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  #292 (permalink)
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kevinkdog View Post
Nice progress, great to see!

I'm curious about your statement. Stop orders are really just market orders as far as the exchange goes. I have always seen slippage with them.

Maybe you are calculating slippage differently?

I calculate slippage as the difference between my actual fill and the strategy engine fill.


Some of my results (all market or stop orders):

For MES, last couple of weeks

I assume $1.25 per side slippage for MES

Average actual slippage based on 272 trades: $0.81 (or 65% of planned slippage - which is good!)

22% of orders had positive slippage
5% had $0 slippage
73% had negative slippage, as much as 8 ticks


Maybe I am doing something differently than you?

Thanks! It is nice to have my first strategy up and running, though I still consider this to be a live incubating period, thus the use of micros instead of e-minis.

I think we calculate the same, but for example, on a reversal entry I am seeing this (sorry no screenshot, Trade Manager is acting up and cannot get any data):
  • Buy to cover: 3005.50 (exit)
  • Buy: 3005.5 (entry)
At least, that is what I saw yesterday. I will try to get a screenshot of the trade list after we've exited our positions for the week. Regardless, we always add at least one point value in slippage, same as you. For this week, it has been slightly in our favor, but we haven't combed through all the data yet.

Considering I have just started using stop orders (in TradeStation): what is the purpose of setting a stop price if they just become market orders? Entering at stop versus market has a big impact (positive) on strategy performance. I'm guessing it is just when the strategy will send the order to TS.

~vmodus

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  #293 (permalink)
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vmodus View Post
Thanks! It is nice to have my first strategy up and running, though I still consider this to be a live incubating period, thus the use of micros instead of e-minis.

I think we calculate the same, but for example, on a reversal entry I am seeing this (sorry no screenshot, Trade Manager is acting up and cannot get any data):
  • Buy to cover: 3005.50 (exit)
  • Buy: 3005.5 (entry)
At least, that is what I saw yesterday. I will try to get a screenshot of the trade list after we've exited our positions for the week. Regardless, we always add at least one point value in slippage, same as you. For this week, it has been slightly in our favor, but we haven't combed through all the data yet.

Considering I have just started using stop orders (in TradeStation): what is the purpose of setting a stop price if they just become market orders? Entering at stop versus market has a big impact (positive) on strategy performance. I'm guessing it is just when the strategy will send the order to TS.

~vmodus

So what happens with a stop order is that as soon as that price is hit, a market order is immediately sent, and is filled at the prevailing price. So it doesn't guarantee any kind of price like a limit order does. In fact, depending on the situation, your stop order may not be filled at all. That is rare though, thankfully.

I have seen stop orders executed as many as 10 points from the the actual stop price.

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  #294 (permalink)
Legendary Systematic Algo Trader
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kevinkdog View Post
So what happens with a stop order is that as soon as that price is hit, a market order is immediately sent, and is filled at the prevailing price. So it doesn't guarantee any kind of price like a limit order does. In fact, depending on the situation, your stop order may not be filled at all. That is rare though, thankfully.

I have seen stop orders executed as many as 10 points from the the actual stop price.

Ah, okay that makes perfect sense, thank you so much! Have a great weekend, my friend!

~vmodus

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Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
Thanks: 1,940 given, 1,888 received

End of Week
This was a pretty wild week for us, in a good way I think. We were able to run our new strategy and it performed well on the micro indexes. We have a couple of variants that are currently in the testing phase, so that is exciting too. As I mentioned yesterday, I don't post actual P&L, but will indicate if I was up or down for the day, and overall for the week.

Today's Results - live
  • Positive P&L at close, trading MES and MNQ (1 contract each)
  • No open positions at close (I don't hold over the weekend)
  • 26 round trip trades
  • 38% profitable
  • Overall profit factor 1.16
  • System efficiency: -13% (worse than testing)
  • Execution errors: one
I'm not terribly happy about the execution error, which probably cost $50 or so. I was carrying two contracts of MNQ because I misinterpreted a message from TradeStation and probably caused a second order to be placed. I will review and correct.

Efficiency and profitability are not where I want them, but still profitable despite that. I will continue to monitor.

Two things I didn't like:
  1. TradeStation flaked out and I could not get accurate data from the Trade Manager, nor do Trade Analysis. I couldn't do anything until market close when I was able to restart my PC. Restarting TradeStation did not resolve the issue.
  2. TradeStation also would not allow me to cancel a limit order for my end of week exit. It told me the Trade Manager was locked. BS, I say.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Weekly Result
  • Positive P&L over 3 trading days; all days were +
  • 53 round trip trades
  • 44% profitable
  • Overall profit factor 1.85
  • System efficiency: 0% (better than testing)
So all-in-all, a good week. I see some potential system improvements, but it has proven to be tradable thus far.

Holiday Analysis
This weekend is a holiday weekend, for all intents and purposes, though unlike any holiday weekend we've seen in ages. Some of our past strategies have typically avoided trading holidays. I did some analysis on my latest strategy against historic holidays and it does well enough to run. I will leave this running through the Independence Day holiday (July 4th).

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's all for the week. More trading next week. Have a great weekend everyone and please be safe!

~vmodus

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  #296 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
Thanks: 1,940 given, 1,888 received

I only have a few minutes, so I figured I would give a quick update:

Today's Results - live
  • Negative P&L at close, trading MES and MNQ (1 contract each)
  • 2 open positions at close, both positive
  • 26 round trip trades
  • 19% profitable
  • Overall profit factor .34
  • System efficiency: -32%
  • Execution errors: several
  • System errors: several
This was my first day of losses with this system. Tracking the system, it would have been one of those losing days even without any errors.

I had a couple of execution (human) errors. I started my system exactly at open, to see what would happen. That cost me two bad trades immediately. I found I need for my signals to normalize, especially when we have a gap over the weekend. The other execution error was when I had to restart, I forgot to restart the automation on MES (missed two orders).

Then I had several bad (phantom) trades overnight, which were system errors. I have to determine how this happened and how I can prevent it. I also had a system lockup at about 945 ET (great timing, huh?), which required a reboot..... a VPS is looking better every day.

If something could have gone wrong, from my end, it did. Still, I was able to recoup some of the earlier losses. With my current open positions, I should be in good shape to end the month profitable, which is good considering I will only have had 6 trading days.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

My overnight problem
So I had issues overnight, but everything ran fine while I was awake and monitoring. Now I'm thinking that maybe I just want to run this while I am able to monitor my positions. I would just confirm that my entries are occurring when and where they should, as well as reversals and exits. So I decided to check to see where the sweet spot of my strategy is, in other words: when does it make the most money? I dropped a sample of over 1700 trades into Excel, did a pivot table based on entry hour and summed the total for each hour, and then did a graph:

MNQ - 1700 Trades


So my sweet spot is 800 ET to 2100 ET, hours I am typically awake and active. So rather than run this 23/5, I can run this 13/5, which would account for 88% of my profits for this period, at least in this example.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Learning
I have learned some things about this system:
  • Wait 15 minutes after the Sunday open to start the system, to allow the data to normalize
  • Exit on Friday should right after 1615 ET for US equity indexes (ES, YM, NQ, RTY)
  • I don't need to trade this overnight
  • The alligator 'teeth' may be keeping me out of good trades
With this information, I can improve future versions of this. I am still determining if this strategy will be effective long-term, but the offspring show lots of potential.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's all for tonight. See you all tomorrow!

~vmodus

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  #297 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
Thanks: 1,940 given, 1,888 received

Preventing Duplicate Fills in TradeStation or MultiCharts
I forgot to mention one other thing I did yesterday, which was helping a fellow member here with a little problem. He was trying to prevent duplicate fills on a strategy, which occurs when a strategy condition is met more than once before the order has been filled. If you use PowerLanguage or EasyLanguage, check it out:

https://futures.io/tradestation/55335-getting-duplicate-fills-automated-strategy.html#post813890

~vmodus

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  #298 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
Thanks: 1,940 given, 1,888 received

Today's Results - live
  • Positive P&L at close, trading MES and MNQ (1 contract each)
  • 2 open positions at close, both negative
  • 12 round trip trades
  • 42% profitable
  • Overall profit factor: 2.9
  • System efficiency: 51%
  • Execution errors: none
  • System errors: one, with a caveat

Today was okay. System efficiency was really good for a change and profit factor is was better. I'll take the positive P/L for the day. Yesterday was such a whack day that it has skewed this week. Things probably won't be back on level until Thursday, hopefully.

Execution was clean, no errors by me.

System Errors
There was one missed entry, which is okay, as I don't think the price ever hit. I solved a problem that I've been having when looking at backtested results versus live results. I will need to determine a method (programatically) for backtesting, but I know I cannot exactly use the built-in reports. In other words, I need to create my own strategy report to compare with live trading.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

That's all for today. Let's do this again next month!

~vmodus

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  #299 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
Thanks: 1,940 given, 1,888 received

Resolving Start of Week Entry Issue
I have run into an issue with some of my strategies, but in particular my latest, where my signals have not normalized (or settled down, if you will). So I have written a little bit of code to wait for 10 minutes before trading.

Here is the little snippet of EasyLanguage / PowerLanguage code that helps accomplish this little feat:
 
Code
// Do not trade the open
if Dayofweek(date) = 0 
   then
      begin 
         if 1810 < Time
            then 
               Condition52 = true 
            else 
               condition52 = false; 
      end 
   Else 
      Condition52 = true ;
I then add Condition52 to every buy and sellshort statement. If false, it prevents entry. Easy peasy lemon squeezy.

Start of Week Delay and End of Week Exit


If I had had this code in my strategy Sunday night, it would have saved me a lot of grief. It was a great lesson, though (tuition is steep).

~vmodus

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  #300 (permalink)
Legendary Systematic Algo Trader
Somewhere, Delawhere, USA
 
Experience: Intermediate
Platform: TradeStation, MultiCharts
Broker: TS Securities, OANDA
Trading: Energies
 
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Posts: 955 since Feb 2017
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Sorry, no update late last week. I was busy with a lot of things.

I decided to put the alligator-fractal strategy on the shelf for now. Although sometimes profitable, the trading results did not match the entry signals. I strongly believe in the mantra, "what gets measured gets managed", and because I cannot accurately measure what the strategy is doing and get comparable results, I need to shelve it until I can dedicate more time to troubleshooting. I may need to rewrite from scratch and follow @Big Mike's recommendations on Renko charts (really old post here on FIO).

Anyhow, I am incubating another strategy with Renko bars (amongst other incubating strategies), so I will update the results of that strategy this week. It is a variant of one of my partner's strategies.

That's all for now. I will update later after market close.

~vmodus

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