BillyRay

You cannot legitimately analyze the performance of a vehicle being towed behind a truck. Program trading assures the ES price will correspond to fair market value in relation to the Cash index, regardless of the amount of volume required to place it in line. When these automated programs kick in and there exist a shortage of buyers (sellers) to take the other side of the order flow, price will climb (sink) instantly--with minimal warning and minimum volume required to pull the Cash and ES prices within fair market value. Did volume lead price? Which volume, the Cash or the ES? A simple visual comparison of the ES volume to the same period of the Cash volume reflect the distributions resemble one another only rarely. As I said in my original post, all volume is not created equal.

Great post. I am a 25 year student of volume and range analysis and I would urge that all volume is not created equal. In other words, volume seems to have some analytical or predictive value only when the volume correlates to an instrument that is not dependent on the price movement of another instrument. For instance, the ES (Emini S&P 500)--when the S&P 500 Cash Index is increasing in price, the ES will follow, regardless of the volume. A multitude of program traders assure the price of the two instruments stay within fair market value of one another. But this cannot mean that the ES volume holds predictive value for the cash index it follows. With that said, it can reasonably be argued that the ES influences the cash market prior to the cash market opening. But that influence is shortly lived. In the end, and as the old saying goes, cash is king.

To help control slippage, I do use limit orders to enter positions in an attempt to achieve the best fill price possible at my anticipated price level. With that said, I do not use limit orders to exit a position when my profit objectives are reached. When it is time to exit the market, I want out and I am willing to give up a tick or two of slippage to exit my position to assure I get out. An exception to this rule is in non-liquid markets or during night sessions that are thinly traded. This slippage is calculated into my profit objectives which takes into account the number of total contracts in the position that must be liquidated. As mentioned in my earlier post, there should be a setting in system properties to add commission and slippage to your backtesting results (see image, Commission & Slippage). When you ask about entering at the bid and ask prices, I assume you are referring to backtesting strategies. It has been a great while since I have worked with Tradestation but I do know Multicharts (which we utilize as well as RightEdge) can be configured to backtest using the ask and bid prices (see image, Backtesting Ask & Bid). In a live trading environment it is of smaller concern since limit orders are requesting to be filled at your stated price or better. As for your 5 second cancelation of orders: That may limited to the time frequency (i.e., 1,2,3—minute bars) used to generate a condition which triggers an order. There are also various ways to code an exception when using tick data that can cancel outstanding orders after a certain period. For live or simulated (demo account) trading, it could be a function of the broker API. You may also have the option to convert limit orders into market orders after a certain length of time (see image, Convert Orders). Your example of a buy order depends on your objective. Are you wanting to get filled at a certain price, or are you wanting to simulate the cost of trading into your strategy (which may be accomplished as described above). Also, depending on trading objectives (and your setting, environment, data frequency) you may wish to enter an order before the completion of the one minute bar once a signal is triggered. This may be accomplished by enabling Intra-Bar Order Generation (see image, Intra-Bar Order Generation) which may also be coded directly into the script (i.e., [intrabarOrderGeneration = True]). If you are actually needing to enter the order one tick below the next bar’s opening price of say, ES for instance: Buy 1 contract Next Bar (Open - .25) Limit ; However, the problem with this type of order (as is characteristic in limit orders) is you can be right about anticipated price direction and not profit from being right simply because prices never retrace to your limit price. I use limit orders when I am expecting a retracement of prices to a certain level prior to heading in my desired direction. There are always trade-offs and what works for me may not work for you or anyone else. Reminds me of the saying that we don’t trade the markets, we trade our beliefs. Hope this helps.

Looking at your report, one must also consider the slippage for a strategy which will generally be higher than the commissions. It is probably a good idea on any tested strategy to use a minimum of 1 tick slippage for each entry and each exit. I have seen many systems that were returning 200% annual return take a nose dive and blow the account within the first week of trading when factoring in slippage and commissions. We generally add four ticks slippage a round turn trade and $5 commission, even though most of our strategies are very short term styled trading. Most software programs allow you to set these costs in your parameters where they are automatically calculated into your summary reports.

For a good all around trading platform, I would suggest looking at RightEdge. Programming abilities in C# or dot net is a plus.