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.

I’m sure I could have found it online somewhere, but this is an easy indicator, so I coded it up myself. Programming for TradeStation is pretty easy so far. I was able to start up the platform for the first time last night, and I’ve already duplicated the most important aspects of my QuoteTracker setup.

Here’s a screenshot of the ergodic candle oscillator. You use it pretty much like an MACD, though it can trend much longer than an MACD generally will. Another nice thing about it, is that it is not confused by gaps like most indicators are. You can see in the screenshot, that by watching the crossover with the signal line, you could catch both the upswing and downswing in TEK (in real trading today, I caught the upswing):

And, here’s the RWT_ERGODICCANDLEOSC.ELD file you can import into your TradeStation platform, if you want.

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

I have spent some number of years doing system trading development and I have coded 100’s of systems, all which eventually went bust, or I threw them aside and tried something else. As a result, I have been trading using charts, with my own custom indicators along with the indicators provided with the charting packages. I have always thought a systematic approach would be best, however, in my attempts to develop the ultimate system, I ended up with none. The purpose of this article is to show that you can get good results with commonly available technical indicators.

The truth is, given the current development platforms and technology, there is no magic indicator or system. You have to use a system that implements a core idea well, is not curve fitted, and can handle the market edge cases.

A few weeks ago I found Teresa Lo’s http://www.powerswings.com/ site. She is an experienced trader, who came out of the industry. I looked at her system, and bought her ultimate trading course. She uses a system that is solid, but is not rocket science. It’s a well-implemented trend following system. It works because she knows how to use it. Her swing trading is based on feeding it trending stocks, or she uses it to trade futures at times when they are trending. It is not meant to handle choppy markets, and it is not used for that purpose.

Using ideas from her system and her trading course, I created my own version, and I was amazed by the performance if it is pointed at the right trading instrument. Mine isn’t for sale and hers is, and hers likely better. The point is you are can create a solid system using common building blocks, or by purchasing a realistic system like hers. I don’t know her, I’m just commenting on what I learned at her site and reading her materials.

Here is a snap shot of my system below. It is really simple and consists of the following:

1. A WMA which acts as a trend filter.
2. An Oscillator (Pick almost any like PPO, Trix, etc. I am using my own RSI, but it really does not matter, trust me)
3. Stop Logic (I am using my own modified version of Elder’s Safe Zone, but you can just use a multiple of ATR of price as your stops, like 2.5 or 3)
4. Why does it work? Because it catches the trend and it doesn’t get stopped out on a little noise.
5. Is it Magic? No. It will only work on something that trends,
6. Was it optimized? No. I just picked values that looked correct on the SPY, and applied the exact same values to DIA, QQQQ, and IWM.

Performance

The system was run on the last 5 days of data, 5 minute bars for SPY, QQQQ, IWM and DIA, set with a timer to trigger trades only between 1:50 PM and 4:00 PM eastern, as Teresa Lo suggests with her system. This is because there is too much chop intraday.

The Tradestation reports are below. Using 2000 share lots (Equivalent to 4 mini’s) the system made $17,766 in the last 5 days. This time was picked at random. Will it make this in the next 5 days? Who knows. Do I think a good trend following system will work? Yes, if used to trade trending financial instruments.

What will this system do next week? Probably lose $100,000.

Update: Performance 8-8-2007

4 Trades, 100% profitable. SPY $1,559, IWM $ 1,889, QQQQ $459, DIA $989, Total $4,896.

- TraderD

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

I’m considering two options moving forward. One, I could get a real-time data feed, and build my own trading platform. Two, it looks like I could migrate to TradeStation, and do a lot of custom programming in their EasyLanguage or add-on APIs.

So, anyone out there a tradestation user? If so, I wonder if I could ask you a couple questions. There’s a couple things that aren’t obvious to me from the website. If you aren’t a programmer, that’s ok… some of my questions are about the platform itself. I wish they’d let me download it for a trial in demo mode, or something.

Alternatively, if any of you out there are using a real-time data feed from someone, can you recommend them to me? I’ve been looking, and the most promising one I can find is: IQFeed. They are windows-only, though, and I’d frankly rather have a Unix-friendly solution. Still, I’d be interested in hearing about other windows-only solutions as well.

For either case, if you can help, please either leave a comment, or email me at richard@movethemarkets.com. Thanks!