Someone was asking me how easy it is to make a basic strategy out of the elite function series I am offering through eotpro.com. In particular, their mail said:

Do you have an example strategy with the Easy Language code that utilizes some of the Elite functions? …. For instance take the first PattyB signal after a bias line change, but only if Market Sync is with the trade.

My response:

…here is a strategy that gets in on the first patty b after a bias line change, if market sync is with it. It keeps a stop 2 ticks behind the last plot cycle, and gets out if it shows $200 profit:

vars:
pb(0),
ms(0);

// set up the indicators
pb = $rtFirstNPattyBs(…pattyb input values…);
ms = $rtMktSyncPredict;

// entry rules
if(pb = 1) and (ms >= -1) then buy next bar at market;
if(pb = -1) and (ms <= 1) then sell short next bar at market;

// keep a stop beyond last plot cycle
sell next bar at $rtPlotCycleStopL(2) stop;
buy to cover next bar at $rtPlotCycleStopS(2) stop;

// take $200 if we can get it
setprofittarget(200);

That’s not intended for real-world use! But, it’s an example of how simple things are simple, with these building blocks. The kinds of things that eotpro clients tend to ask for are packaged up, ready to be dropped into a strategy or custom indicator. Stuff that trips up non-programmers, like tracking the bias line and making sure you only take one signal (and only if it’s within the first few bars after the bias change, etc.) is all taken care of for you.

Some functions and indicators that I’m working on for tradestation and multicharts. These will be released through eotpro soon, and are building blocks for customized indicators and strategies. They are common things that either I use or that people ask me for, so these make it easier and faster to put together common ideas.

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Sorry for the lack of videos the last few days. No, I am not losing money, though the accusatory emails are already coming in. Geez, have you no faith? I’m just a bit busy, and extra lazy right now. I don’t make videos when I don’t feel like it. Although if anyone is down and needs kicking, just leave a comment and I’ll try to get up the energy for another post. :-)

I was only watching the markets a short time today, and there was so much volume that I erred on the cautious side. I made one safe-looking trade for 1 ES point near the close. I OSO’ed a profit target and just let it take me out. I wanted to be able to say I at least participated. :-) With so much volume I didn’t want to also do video capture.

BTW, I can’t recall who suggested I put the order bar from the market depth window underneath my matrix window, but thanks! I finally did that, and have 1-click market orders available to me now. I saw on the TS forums that the matrix will be getting buy/sell/reverse buttons in the next release (probably february, they said). So, that will be even better.

(Sorry about the title. It’s my internal name for the charts since I can’t ever remember how to spell the real name.) [Edit: Ok, I looked it up so google could index this article appropriately.... it's Ichimoku Kinko Hyo charts.]

I saw these charts in TAoS&C last year, but disregarded them pretty quickly. It seemed too arbitrary, and also the article said the two main lines were moving averages. Projecting moving averages forward and backward didn’t make much sense to me.

Well, now MWF is interested in them, so I spent some time today taking a closer look. It turns out, the two main lines are midpoints rather than moving averages, and I can see the logic in what they are doing now. It’s really not too much different than moving averages, except by projecting that cloud forward in time they get a nice visual effect.

I’m going to assume you know something about the itchy charts… if you don’t, then check out the article MWF linked.

I think of it like this… as far as I can tell, the three parameters should represent 1/3rd cycle, 1 cycle, and 2 cycles on whatever chart you use. Incidentally, this means that the traditional 9,26,52 are probably not very good choices. On ES I am using 7,21,42 as a start. Maybe I will make it adaptive in the future. Anyway, so given that, it’s clear why a cross of the 1/3rd cycle midpoint with the full cycle midpoint would give you a bullish feeling, and vice versa. It’s kinda like a cycle-width pivot point. So far so good.

Then, they take the average of those two values (though honestly I think it’d work just as well to just use the 1-cycle number, especially given that averaging them seems so arbitrary), and they push that number forward 1 cycle into the future. They also project a 2-cycle midpoint out 1 cycle into the future. The area inside these two points is “the cloud.”

Now, the party line on “the cloud” is that it represents support/resistance. I don’t really buy that. It works no better than a moving average in that regard. BUT, it does make sense that the cloud can help you gauge the trend. Why? Because if you are trending up, then 1 cycle from now you ought to be above the midpoint of this cycle, and you REALLY shouldn’t fall below the midpoint of the last two cycles. See?

So, price relationship to the cloud can help confirm the current trend. Moving averages with a 1-cycle and 2-cycle lag would do the same thing (which is why MA’s with periods around 80 are good at holding price down on ES… it’ll have a lag of 40 candles, or about 2 cycles). Don’t believe me? Here’s a chart with the Itchy cloud, along with 42 and 84 period MAs. See how the MAs and the cloud are very similar? Nothing magic about it.

Ok, so then there’s that line that they project backwards…. what’s that about? Well, they are projecting the current price backward 1 cycle. It stands to reason that, if the current price is above where we were one cycle ago, then buyers are active, and vice versa. That’s all it’s for, as far as I can tell… it adds strength to buy and sell signals if you were already heading in the right direction.

I put the TS code together in a few minutes… it’s very easy calculations. Instead of projecting that one line backward in time, I just put colored dots on top of the primary line. Green means that the backward line was above the price, and red means the backward line was below the price. It was WAY too messy to have a line that looked just like price action, only on a delay. If I want to see double, I’ll get (more) drunk, thank you very much.

For fun, I built a workspace out of the itchy ho charts, meant for scalping. The entry signal is the eotpro.com Patty B signal. The idea is to take the first PattyB after the Itchy lines cross, when the price is in the right relationship to the cloud. I also put on a very quick 5-minute rolling VWAP (and the associated paintbars) as secondary confirmation. I threw it on multiple time frames, as is my usual practice.

You can see a typical play highlighted on the chart. The 3 timeframes all agree about the trend, and we take a shot at a fresh push up on the fastest time frame. I looked over a couple days of data, and it looks pretty decent. Since I can only trade a partial day Tuesday, I may try this bad boy out! :-)

This video goes over the fib confluence indicator and also Thursday’s trading. Another day of small profits, but this time I felt like I was trading well. I only traded a few hours of the day, because as with most Thursdays I was out and about. I also took a phone call from a guy that would like to pay me for some tradestation coding work. If anyone else is interested in having some custom code written for TS, I can usually do it pretty cheaply. I’ve done an IB add-on before as well, but that’s a little more complicated to deal with than EasyLanguage.

I also want to plug this guy’s videos:

… you think I’m long winded… this guy routinely posts 30 minutes of videos a day, and I’ve been watching them pretty religiously lately. Mainly, I watch because his entry and position management style is nothing like mine, and he puts on a pretty good display of discipline and consistency. He also watches the bid/ask action in a way that is at least similar to what I used to do, so I enjoy hearing that. He trades stocks using mostly just moving averages and market context like sector strength.

Watch this post's video on Youtube
Watch this post's video on Youtube

Here is the way my charts look lately, with the one trade I took this morning. +2.75 pts. This chart is built around a primary setup, and the rules for this setup are pretty simple. First, price needs to be near (1) the yellow dots (2) the dashed yellow line and (3) the CMA. Second, the beads and paintbars need to agree with the price. Third, there needs to be a current or very recent PattyB entry signal. Looking over some recent data makes this setup look promising, and whenever I get a chance I will backtest over months of data to be more sure that it “works.”

Exits are managed like I’ve been managing all my trades lately. Combination of trailing stops and “magenta” fib extensions (you can see the fib extensions getting me out of this trade, as they are the red clover-shaped dots in the panel just under price action).

Notice that I’ve modified and cut down on the number of beads I’m looking at. I had mentioned in a recent video that I was planning on evaluating everything and getting down to just the essentials. I think I’m closer now. Although the top line of beads represents the eotpro GVolume Oscillator, I have added the actual oscillator back on top of the PattyB as well. It’s such an important indicator that I’ve decided I want all the nuances of it available to me, should I want it.

Sorry, no video today… I’m out of town and without my headset (again!).

I’m not sure I’ll be able to trade Wednesday, but I’ll definitely be around Thursday and Friday.

I’m taking a half-day today, since I have errands to run. I finished the morning up 2.75 pts after 2 wins. Not bad considering we were in a 4 pt range for almost all that time. In this video, I talk about trying to keep things simple and focused on the local action, rather than getting too wrapped up in the larger-view. For stocks, the long view was essential, in my opinion. For the index futures, it doesn’t seem to be as big a deal.

Here are the screenshots, since I know the bar colors don’t come out very clearly in the videos:

Not sure if I’ll be posting anything else until late next week. We’ll see!

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Since those rolling 0.5 to 1.0 hr VWAPs seemed to give decent price bias today, I thought I’d make a paintbar out of it. Now, I can get all those ugly dotted lines off my screen!

… maybe it will be useful in the long run, and maybe not… I’ve got too many things on my screen trying to tell me the trend, etc. Now it’s time to simplify some, I think. Over the weekend I’ll be taking a hard look at what is helping me, and what is just baggage.

[Edit: sorry, on the youtube video it's kinda hard to differentiate the light/dark colors... but I think you can mostly follow along anyway. Here are the last 3 days in compressed 3382 bars, so you can get a feel for how they look with one of the color methods:

You can see that it's not perfect, but it's reasonable in most cases... and I do like how the blue areas tend to crop up when there's choppy action.]

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I mostly forgot to trade today, because I was playing with all my custom charts. oops! I did get two trades off, for two wins, anyway. Most of this video is about the renko chart view of the day, which is pretty nice.

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I’ve done Range, Change, and Renko bar charts on tradestation now. Check ‘em out (they are range, change, and renko from left to right):

All pictured charts are 1pt charts.

I’ve made semi-realtime change bars for Tradestation, in a kludgy way:

(recall that change bars are like range bars, except the distance between the successive bar opening prices is kept constant, rather than the overall range. So, you get a slightly different picture)

… it uses the ascii import mechanism to get the bars on a chart, which means I can use indicators on the chart. Great! But, I have to reload the chart to pull in more data. And, that recalculates all the indicators. So, I won’t be scalping off this chart! But, for study, and for occasionally getting an updated look at the market from a change/range/renko/etc. perspective, this approach should get me by.

The data is created via an indicator that watches a 1-tick ES chart, spitting out new bars to a file as each new bar is created. I only did change bars tonight, since Mr. White Folks got me interested in them. I’ll code up range bars and renko bars and 3-line-break and whatever else I want soon enough.

Here is an idea from long ago… using a sliding-window technique to compromise between responsive charts and summary-level information.

For scalping on @ES, 1597 share bars are about the fastest candles I can comfortably watch. Yet, when turns are fast, my bead-reader measure of the trend direction is too slow to turn around. So, I created a chart out of 377 share bar data, but created synthetic bars out of a rolling 5-bar window. These synthetic bars show approximately the same level of information as the 1597 bars did, so I don’t have to put up with any extra price noise.

These two example pictures should make it clear what I mean… you can see the 1597 share bars on the left, and my synthetic 1597-level info on the right, made out of ultra-fast 377-share bar data.

Interesting to note that the good PattyB (eotpro) signals on the 377 chart generally have corresponding PattyB signals on the 1597 chart. What a great indicator! It’s just that the rest of the “bead” indicators don’t usually line up in time to validate the faster turns. The 377 chart is fast enough, all around, though.

Also note how generally disorganized the beads are in that first pic, when the synthetic price chops through that blue moving average. Two indications of choppy action. (This works on normal charts as well, but the MA isn’t usually quite so eager to get inside the action.)

I’ll look through a bunch of historical data before I try to replace my 1597 chart with this synthetic one, but the idea makes enough sense…

Aside: Note that while the drawing part would be a ton harder, it should be possible to create synthetic renko/range/change/etc bars manually and draw them. The problem is, you wouldn’t be able to apply indicators to those charts, since there’s not a 1-to-1 correspondence between the underlying chart data and the synthetic bars. Oh well… I would like to play with those change bars, so maybe I’ll write the code regardless.

I spent a couple hours yesterday trying out a new technique for identifying chop. I think this one might actually work. Need to look at a lot more charts, but here’s an example:

The indicator describes whether recent action is up, chop, or down. I’ve highlighted the chop areas on the chart itself to help you see how to read it. I really do think this has potential to be the best chop indicator I’ve seen. Not sure exactly how useful it is, though, because most turning points are identified as choppy until it’s clear that we are actually headed in a new direction. This means, most of the “best” signals (which are near turning points) get filtered out. Maybe I can make it optimistically guess that turning points aren’t chop… a sort of innocent until proven guilty thing. This would mean that it would take longer for it to tell you about choppy areas… but it may be a good compromise.

Here is the video I promised about my TS matrix setup. Feel free to ask any questions.

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I basically lived in front of Tradestation this weekend. I’m pretty sure it wasn’t healthy. I will need to eat extra vegetables to compensate, or something.

The word for the weekend was “Adaptive.” I read Rocket Science for Traders: Digital Signal Processing Applications, which is a great book. It outlines algorithms for automagically estimating the dominant periodic component of price action. If it’s accurate enough to be useful, this is an important piece of information. For instance, if you know how fast price is cycling, then you know the correct period length to use for oscillators, so that they don’t suffer from horizon effects. I made like 17 adaptive indicators for TradeStation so far, and I’ll talk more about them if they turn out to be useful.

On the stability front, I did manage to break the platform at least 5 times, but that’s not as bad as it sounds. Luckily, the program is very modular (multiple communicating processes), so it never completely crashed. Instead, it continued working in some hampered fashion, and all five times I was able to save/verify whatever I was working on. That was really great.

3 out of 5 crashes happened when I changed some indicator code, while the indicator was also visible on a chart. Usually, this works without issues. The worst case is if the change introduces an error (like divide by zero, or if you rename a function that the indicator calls), and then the platform just tells you, and takes the indicator off the chart. No problem. Sometimes, though, it decides to die instead.

The other two crashes are a complete mystery to me. I was just typing in some code, and I think the syntax hi-lighter got confused and messed up the editor. Because, I was unable to type anything else new in that window, though I could edit stuff that was already there, in a limited way. Weird.

Some things I like:

• You can tell it to only compute indicators at the end of each bar. This is nice because I think the wiggly lines on the far right in most charting platforms are distracting. I mentioned in the past that I try to use (H+L)/2 indicators in Quotetracker whenever I can, in part because it keeps the indicator value from changing so much on every tick.
• You can “stack” indicators visually in the subgraphs, so that they don’t take up so much room. I’m not on the right computer to show you a screenshot, but if you’ve seen the EOTPro blog you’ve seen plenty of examples where multiple lines and dots share the same subgraph below the candles.
• It’s very quick and easy to try random ideas… it encourages experimentation.
• You can temporarily lock the matrix, so that clicking on it will not initiate orders. Until I found that feature, I was closing the window every time my cat got within 5 feet of the computer.
• Lots of code available on the net already, for most every public indicator you’ve heard of.
• The “Radar Screen” has great potential, in that you can compute random facts about the listed stocks via custom code. This is orders of magnitude better than quotetracker, where I had to have charts up for the paintbars to be “active”. So, one thing I’ve done already is applied a “signal-to-noise ratio” computation from that Ehlers book to the radar screen. This tells me at a glance which stocks are too noisy to bother trading at any given moment. I won’t need to waste time looking at charts that aren’t tradeable. (That SNR indicator is pretty sweet, based on my 48 hours of experience with it.)

Some things I don’t like:

• Their forum’s search feature doesn’t seem to work with Firefox. Neither do some of their account maintenance pages.
• No simulation/demo mode to practice in. This also means no simulated forward testing of strategies…. only backtesting.
• No namespaces or package management for code. You just have to give everything a name you don’t think anyone else will use. And, if you import 100’s of functions from the net, good luck remembering which is which if you decide you don’t need them later.
• It sure would be nice if they would get rid of the length restriction on function/indicator names, given that I have to make them globally unique. There are other annoying length restrictions. Most frustrating is that they impose a length on the example use you can provide as documentation. Sometimes I was unable to provide an example, becuase no sane example would fit within their length limits.

I have a number of nit-picky things to say about the language itself, but that’s to be expected because I am a programming language nut. Overall, despite some annoyances, I’m very pleased with the platform so far. I haven’t come across anything yet where I couldn’t figure out how to do it. Of course, now the question is whether all the technology will make me more profitable, or if it’s just a fun distraction.