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  1. 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!
  2. Although it is not labeled as such, the chart below is a 10-minute chart of the S&P mini’s for Wednesday, September 5, 2012. Late in the day the market had a sell-off over a 20- to 30-minute period. Then, at the point marked “1.”, we see a black inside candle (an inside candle is one where the entire range of the candle is inside the range of the previous candle). Then we see higher lows and higher highs as the market carefully tests the reversal up, briefly dips back into the range, then climbs consistently up again. Professional traders know not to arbitrarily jump in front of a trending market – that’s a great way to get slaughtered. The reason is simple: you never know how far the market will move before it reverses. It’s a lot like jumping on the train tracks and hoping the train stops before you get run over. Wait until the market shows it has stopped, then enter your position. The correct way to play most reversals is to let the market show you the move is over. How? By watching the move stop, and then go sideways for a time before moving up again. That’s what the big players do – they have to (they are risking a lot more than we are). The right place to enter a buy is the third candle after the candle marked “1”. The first two candles following the candle marked “1” show a possible end to the downward trend – meaning selling strength is over for the time being. But as the market climbs above the 140200 area where momentum has shifted, we get a new uptrend, by definition: higher highs and higher lows. And as confirmation, we have already seen an entry signal in our stochastics indicator. Also, the low was established and has not been broken for 20-30 minutes. By buying at this point, you could risk 150-200 (6-8 ticks) to make 200-400 (8-16 ticks), not the best risk-to-reward ratio, but not bad for a trade with good odds for success. Many Profitable Returns, Trader Gregg Mr. Killpack has been studying the markets since 1988. He has read over 40,000 pages about trading and investing strategies, fundamental and technical analysis, and related topics. He began day trading in 2001. TopstepTrader http://www.topsteptrader.com seeks to find and develop undiscovered trading talent from around the world. While in our program, those who display a strong trading skill and aptitude will be backed as a fully-funded trader.
  3. Hi, This is a thread to share about the idea of "fresh, or first touch". Here are the basics. The first strategy is shown with the red triangles on the "10 pip 50 ma" chart. I use a 50 ema (magenta line) crossover. If a trend has been in progress and price has been separated from the 50ema for "a while", when price finally does cross the 50 ema by 10 to 12pips (EUR/USD); then I fade back to the 50ema. I want the touch and cross to be the first touch of the 50ema and a fresh one. I use an 18 pip stop or less. The stop is rarely hit, I avoid market openings. The trade does not come around too often (5 min bars), but it is a very sure trade. The yellow envelopes are 15 and 30 pips from the 50 ema (on VT trader). Dark blue is 250 ema. Another is similar strategy is shown on the other 5 minute chart by the white triangle. This is using the outer 50ema, 30 pip yellow bands envelope. After a long trend, wait for the price to finally first touch the 30 pip outer band opposite the trend direction. Then fade in the direction of the trend to the 14 ema (light blue line), or for a few contracts you can hold a runner to the 50 ema. The yellow block on the first chart shows another example of a near envelope touch that could have been taken. I use a 18 pip stop for this one also, but it is a high probability trade also. Of course if you want to tighten up your stops, you can wait for compound confirmations, like trend lines and so on. The idea of the thread is to invite others to add ideas that they are using on any kind of index, stock, or futures. Also since these are reversal strategies, note the conditions you avoid, like bb squeeze breakouts, triangle squeezes, market openings, etc. The idea is to have a few extra strategies that are high probability to be watching for, to trade more often. I will soon post a download with some coded alerts that I programmed for VT Trader, so you do not have to watch the chart for hours. It will be on the coding forum. I already have a paint bar alerts system I posted for Quotetracker. Then I would like to expand to useful observations. Something like, in a strong trend generally the price will bounce off the 14 ema 2-3 times before it retraces to the 50 ema. Or maybe after a squeeze breakout, at the first touch of the 50ema enter trade to continue with the trend, stop 15 pips. Another is to just use the 15 or 30 pip bands as a reversal guide in a sideways market, reversing to the 50ema. So I hope this is of interest to others, these observations can have been so useful in predicting profitable strategies.
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