Trading Technique with TS
Home Up Gen. Pattern Finder IB_Direct Fuzzy Logic Controller Neural Nets

 











 

 

Latest Site Updates



Description of an effective Trading Technique with TradeStation

Foreword... or my critical Words of Wisdom...

The technique outlined below is suitable for discretionary traders.  It is based on a fairly complex data analysis which has been translated into a set of proprietary tools.  Before describing these tools, we feel it is important to have these first guidelines in mind, gathered along  nearly 15 years of experience:

  1. Most indicators, either custom made or built in trading platforms, do calculate one or several mathematical outputs at each bar.  One may also (correctly) say that prices are noisy, chaotic in nature, which obviously make "market reading" rather difficult. 
    However, in my opinion, the problem is elsewhere...  Indeed, most of the time, there is simply nothing to read in the market, and more pragmatically, buying and selling are essentially discrete decision points.  This simply means that trading is inherently dependent on an event driven technique.  In other words, if you wish to crunch large amount of numbers in any crude or sophisticated way, irrespective of the rare salient events where effective decision making is only sensible, well... you might just be wasting your time...  and LOTS of so-called trading gurus are quite willing to take you for a ride along the meanders of the never ending quest of the Holy Grail...
  2. Any sound decision can only make sense in perspective or context, unless you stick to quick scalping or to the simplest reversal strategy, assuming you get your pivot calculations right too.
    The best way to represent context is to work in a multi-time frame environment (2, 3 or even 4 time frames).  It seems obvious that a move in your time frame of choice, determined by indicators lining up nicely either long or short, can only show strength if supported by a similar set-up in a higher time frame.  Choice of adequate time frames may however not always be easy.  For synch purposes, time frames will often be in multiples like 1, 2, 4, 8 minutes.  In addition, some will prefer finding confirmation from 2 or more higher time frames.  Others may find more suitable to balance their time frame analysis with one higher and one lower time frame.  It is likely that using a conservative rule base over 4 time frames can reduce trading ambiguity to next to zero.
  3. There are always times of congestion, relative market inactivity, which will inevitably affect indicator calculations.  One way to reduce such impact on indicator reading is to opt for tick charts or volume charts, or alternative market representations like Renko charts.
  4. Markets are highly dynamic.  Prices are chaotic, non stationary etc... Still, this is no reason to try and throw everything but the kitchen sink into your favorite trading platform.  Do not forget to still be able to fully understand the method you are trying to put together...  You are the trader... don't ever forget this subtle point.  Successful traders always know the finest details in trading calculations.
  5. Markets are chaotic, and contain fractal features.  Once you have found a sound technique, it should work the same on another set of time frames, as well as on other financial instruments.  This is the 'acid test'.  Many models just fit one instrument on a single time frame, and are bound to fail sooner or later.  There may of course be some adjustments needed (not more than a few degrees of freedom if possible) to adapt from one instrument to the next, but not more than that.

These forewords may sound like vague generalities, and there are admittedly many ways to kill a cat (hmmm... I really hate this expression), but they can be a crucial time saver to you in the end, and most important may prevent you from wandering around lots of trading costly dead-ends...

Essential Tools

  1. A prerequisite to trading in my opinion is some knowledge of Fibonacci numbers, and in that respect, I can for instance recommend reading Jo DiNapoli's books.  Most traders calculate Fib retracement and expansion numbers.  There is more to it, and I may write about it at some point, although there is already ample literature on the Internet.
  2. Another interesting calculation tool is the Murray Math Lines algorithms.  It is still a proprietary algorithm, I believe, but it has however been mimicked and rewritten for most platforms nowadays.  We of course have our own.  A *FREE* VBA version of the algorithm is freely available on a MS Excel spreadsheet on this site.
  3. Adaptive indicators which calculate OK in a multi-time frame environment, such as stochastic indicators.

I also believe a good pivot calculation is essential.  It may at first look like just another display method for swing analysis, but there is more under the bonnet...  Pivot sequences (in 2 or more time frames) can be used to derive waves, and can be used with advanced artificial intelligence algorithms to detect the next pivot with relatively high probability.  We use a numbering scheme (pivot classification somewhat remotely inspired by Clyde Lee) Here is a recent TradeStation screenshot (ES e-mini 8000V) for your perusal.  The indicators shall be available for sale some time this year.

More to come eventually... I can't disclose everything, can I...?

In the meantime, here is an internal draft document now available: BV_TSINDS.PDF  which describes how to read our proprietary indicators for effective trading. The document is also in HTML format (~600KB) on this site, but some formatting may have been lost in the conversion.

Feedback / Contact

For more info or feedback (always welcome), please contact us by email at Support@ForeTrade.com

Home Up Murrey Maths Lines Best viewed with MS Internet Explorer 5 and above

Copyright © 1999-2006 ForeTrade Technologies (Last modified: March 03, 2006)