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Hi Guys, I'm new here, so I'm going to try to commit some time on how I'm building an automated trading strategy using technicals within NinjaTrader. I consider myself a knowledgeable trader, yet there's always things to learn and discover every day. These series of articles is to spur discussion and hopefully give some of my trading insights away to the community. That being said, I'm going to begin with how I identify reversals. Identifying Reversals Nothing is easier than to identify amazing trading opportunities looking at a chart in hindsight. As we all know, doing the same in real time is a different ball game. In the chart below (showing the ES-mini of last Friday, March 19, 2013) I marked, in hindsight, what would have been some good entry points, either on the long or short side. Wouldn’t it be nice if we could spot some of those opportunities as they occur, in real time? ES1 by TraderFrank, on Flickr To find out, I employed my favourite tool for the past year or so, Bloodhound from Shark Indicators. (Bloodhound runs on Ninjatrader). I started out by trying to define what seem to be some of the common characteristics of the situations marked on the chart in yellow. I’ve found the following: most yellow circles contain candles with long tails and/or long candles with no tails at all good long entries start with an up candle and vice versa the candles in yellow are close to the opposite Bollinger (2,20) lines (lower line for longs, upper line for shorts) the MACD is below 0 in the case of long signals and above 0 for shorts Let’s see how we could define these rules in Bloodhound. (For our exercise, I’ll assume the reader is somewhat familiar with Bloodhound, and has a basic understanding of the Solvers and the Logic and Function nodes). First, let’s define long bottom tails with the Indicator Comparison solver by comparing the Low to the Open of the current bar. More precisely, we’ll want to find candles where the Low is “much lower” than the Open. (Note: price data can be accessed through SIChameleon, a Bloodhound component, on the indicator list). A welcome suggestion from Zac White of Shark Indicators to use the ATR measurement unit to identify candles with long tails allows us to create a signal that will work on all types of charts, whether they’re range, tick, renko, or time charts. And by setting the ATR period to 1, we effectively tell Bloodhound to evaluate the current candle only. Very useful. See the settings below. Settings 1 by TraderFrank, on Flickr Notice how we define “much lower”: while we could use the default Ticks as measurement unit, by using a 1 period ATR with a Value of 0.5 and the Long Output setting as shown, we are telling Bloodhound to mark any candle where the Low is at least 50% lower than the Open. (The 0.5 setting, of course, is not written in stone. E.g. a setting of 0.33 would mark bars whose tail is at least one third of the whole candle.) After adding a Bar Direction solver to our logic, we would get this: Settings 2 by TraderFrank, on Flickr Now let’s say, I only want long candles with no top tail: no pullback, just sheer momentum. I can do that by adding another Comparison Solver with the setting Close=High (Opposite settings for shorts). So far so good. But what if I also want to include long candles with no tail at all? They definitely indicate momentum. ATR, again, comes to our help: the Comparison solver with the Open<Close by 1 ATR setting will spot long green bars with no tails. No let’s see how we could put all these ingredients into a logic. Settings 3 by TraderFrank, on Flickr Now, since we are interested in long bottom tails with a MACD<0 and Low<BollingerLower setting, we can add an If Then filter to the equation. The logic, with the mirror code for shorts added, will look like this: Settings 4 by TraderFrank, on Flickr Looks complicated at first sight, but if we read the chart step by step, it’s quite easy to follow the logic. Finally, let’s see what signals this code would give us for the ES on March 19, and compare it with the “ideal” signals above. ES After by TraderFrank, on Flickr Not bad at all. While a signal or two are clearly misses, the majority of the “racing lines” seem quite usable. Now up to the next steps: fine-tuning and backtesting, then defining some sound money management, not to mention controlling nerves. But those must be topics of future articles. Happy experimenting and successful trading to all!
Hello All: I have been a trader for a very long time. Each of these indicators are based on ^ADD. I find NinjaTrader 7 lacking and does not have what I think are basic indicators. Listed below are some of what I want: These are for market analysis. (1). Cumulative Advance/Decline Line The advance/decline line is the most popular of all internal indicators by far. It is a very simple measure of how many stocks are taking part in a rally or sell-off. This is the very meaning of market breadth, which answers the question, "how broad is the rally?" The formula for the advance/decline line looks like this: A/D Line = (# of Advancing Stocks - # of Declining Stocks) + Yesterday's A/D Line Value The most popular data used for the A/D line is from the NYSE or Nasdaq markets. It is cumulative and normally plots a line similar to the price chart of the given index. The A/D line can be used alone or together with the price chart to look for divergences. A divergence suggests that a move in the price chart is unsupported by the broad market, and it should, therefore, be taken as a warning of an impending turning point in the index or market. A traditional technical indicator, such as a moving average or a stochastic oscillator, can be applied to the chart or used to smooth the signals it gives. (2). Advance/Decline Spread A variation on the A/D line is the A/D spread. Just as its name implies, the A/D spread charts the difference between the number of advancing stocks and declining stocks in a given market on a given day. Unlike the A/D line, the spread is not a cumulative chart, so each day is calculated separately. The formula for the A/D spread looks like this: A/D Spread = # of Advancing Stocks - # of Declining Stocks The chart of the A/D spread is an oscillator that revolves around a zero line. The A/D spread is interpreted much like any oscillator with overbought and oversold levels near the extremes of the chart. When the A/D spread crosses above its zero line, this means more stocks are advancing than declining, and vice versa. This oscillator is extremely fast, so a moving average is usually applied to slow the chart's movements and signals. The technician can fine tune the number of days set for the moving average to the market data. (3). Advance/Decline Ratio Another variation on the A/D line is the advance/decline ratio, which divides the advancers by the decliners. Here is the formula: A/D Ratio = # of Advancing Stocks / # of Declining Stocks This formula creates values that cannot be less than zero because it is a fraction (or ratio). A value of 3 means that three times as many stocks advanced as declined. Any value less than 1 means more stocks declined than advanced. Because of the nature of fractions, the chart is more legible using a logarithmic scale. Like the A/D spread, this chart moves quickly, so it's usually smoothed with a moving average. (4). Absolute Breadth Index The absolute breadth index is a measure of internal volatility. It calculates the absolute value of the difference between the number of advancing and declining stocks, making it a slight variation on the A/D spread. The formula for ABI looks like this: ABI = | (# of Advancing Stocks - # of Declining Stocks) | Because the ABI is an absolute, its value will always be positive. The chart is a representation of the volatility in the spread between advancers and decliners. The ABI can be smoothed using a moving average to facilitate drawing longer-term trend lines. A fast-paced, choppy chart of the ABI can indicate a choppy, range-bound market. (5). Breadth Thrust Breadth thrust is an internal indicator that is somewhat more complicated and harder to find. It is a ratio of moving averages that creates an excellent judge of market momentum. The formula looks like this: Thrust = x-Day Moving Average of Advancing Stocks / x-Day Moving Average of (Advancing Stocks + Declining Stocks) Since this formula creates a ratio whose denominator is a sum of both advancers and decliners, the value cannot be greater than 1 or less than zero. The breadth thrust indicator, therefore, creates a percentage value that moves just like a traditional oscillator from 1 to 100 (or .01 to 1.00). Breadth thrust can be read just like a stochastic or RSI, where overbought and oversold levels are at the extremes. Divergence with the underlying price chart points to weakening momentum. The number of days to set for the moving averages should be determined by the time-period being evaluated. (6). Arms Index (TRIN) Developed by Richard Arms, TRIN is a double-ratio that divides the A/D ratio by the A/D volume ratio. The formula is somewhat long but, fortunately, the TRIN charts for the NYSE and Nasdaq are some of the easier internal indicators to find on the internet. For those who are curious, here's the formula: TRIN = (# of Advancing Stocks / # of Declining Stocks) / (Volume of Advancing Stocks / Volume of Declining Stocks) For reasons that should now be obvious, the value of TRIN cannot be less than zero. The Arms Index is read somewhat counter intuitively. A value of less than 1 means advancing stocks are getting more than their share of volume, which is bullish for the market. When the value of TRIN is more than 1, declining shares are taking an outsized amount of volume, which is bearish for the market. TRIN is usually smoothed using a moving average, which should be tuned to the time-period being evaluated. Trend lines drawn from the moving average reveal the direction of market momentum. (Remember that the value for TRIN moves down as advancing volume goes up). (7). McClellan Oscillator Searching for an even more refined internal indicator, Sherman McClellan designed his own oscillator. Though the calculations for McClellan's Oscillator are far too complicated to compute by hand, they help demonstrate how the indicator works, so here they are: McClellan Oscillator = [ 19-Day Exp. Moving Average of (# of Advancing Stocks - # of Declining Stocks) ] / [ 39-Day Exp. Moving Average of (# of Advancing Stocks - # of Declining Stocks)] This formula creates a ratio comparing the 19-day and 39-day EMA of the A/D spread. The chart is an oscillator that ranges from +100 to –100 with overbought and oversold levels usually found at +70 and –70 respectively. The McClellan Oscillator can be read just like any other oscillator and is usually not smoothed, but it can be charted with a moving average as an indicator line. I am not a programmer. I am a trader. Where can I find these? Or would some of you want to take on this project? Thanks, YoderIII