Improving Trade Entry (Don’t miss the move!)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

My primary method of trading is based on an adaptive moving average crossover. The method attempts to catch intraday moves of .75 cents or more on equities, limiting losing trades to around .20 cents and maintaining about 50% profitables trades. The system works well, but many false signals are generated that are difficult to filter out, without also filtering out the type of moves I am looking to catch. Some filtering can be done, but the system is still left with too many false signals that need visual confirmation to ignore or act on.

Some signals are generated that are neither false or positive, and are neutral with an undetermined direction, that later become profitable. Because I have signals coming from TradeStation, and Trade Ideas, a neutral signal can be easily lost, as another signal is generated, and another chart needs to be reviewed. Discovering later that the neutral signal became positive, and generated considerable profit can be frustrating. It was a move I should have been in on, and I was not.

I have solved this problem by creating an indictator that tracks positive profit on a position, and creates an alert and a visual per bar profit indicator that allows for subsequent entry as a trade becomes profitable. An additional benefit is that a neutral signal can be dismissed, knowing that an alert will be generated if it does become profitable. This simple method has allowed me to eliminate missing strong moves where the signal was generated early.

In the attached screen shot, a short is generated, and a red cross is created, The next two bars, the trade was negative, and yellow bars were created. On the fouth bar, the trade became profitable (green), and gained profitablity as the trade continued until its signal exit.

- TraderD

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com