InVivo.Stops for eSignal

Teresa, October 31, 2007 @ 11:38PM ET | Link | RSS | Read via Email | Start a Discussion  

Stops cannot be eyeballed. A trader that places stops arbitrarily or uses stops calculated incorrectly is destined to always exit too early and miss the home run, or exit too late after a change of trend.

Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. — William Eckhardt

Stops can be used in two ways:

14-fnm.gif

They establish the appropriate price to exit a trade.

14-isrg.gif

They can also establish the appropriate price to enter a trade.

InVivoStops Provide The Definitive Edge

If you make a bad trade and you have money management you are really not in much trouble. However, if you miss a good trade there is nowhere to turn. If you miss good trades with any regularity you’re finished. — William Eckhardt

Stops must be placed strategically, yet nearly all commercially available stops have serious flaws.

In Engineering Better Bollinger Bands and Thoughts on the Kase Dev-Stop, I demonstrated that InVivo.Stops accurately reflect volatility and range. This is a must, because we never, ever place stops based on what we can afford to lose. Stops must be placed where they ought to be, and we reduce our trading size as required to manage risk to the account. This is our definitive edge.

Used alone, InVivo.Stops is known as a stop and reverse system, that is, it is always in the market long or short. In practice, traders require additional conditions (such as a time filter, trend filter, a moving average filter, etc.) and impose restrictions to qualify trades. In addition, they must also decide on the amount of leverage to use and calculate the position size based on the foregoing.

There may be many moving parts, but make no mistake, the stop is the backbone of any trading system or method. In fact, InVivo.Stops is the heart of PowerTools for eSignal.

Using InVivo.Stops

InVivo stops are engineered to reflect actual volatility and range, providing users with a real edge over other so-called volatility-based indicators or bands.

14-aapl.gif

Use InVivo.Stops according to the following two rules:

While the math behind InVivo.Stops is complex, using this indicator is easy as 1-2-3. InVivo stops shows you the exactly where your stop is at all times. The stops can also be used to buy and sell options, particularly our “Plan B” bull call or bear put spreads.

Lifetime License for eSignal

InVivo.Stops for eSignal** is a must-have for any trader. This indicator can be applied to tick, volume, intraday and daily charts. It is available for individual traders only for a donation appropriate for your personal situation.

Please Note: Orders are processed on weekdays only. If you order on Saturday or Sunday, you will receive your file on Monday.

**Requires a valid subscription to eSignal with access to Advanced Charting.

PowerTools for eSignal

Teresa, October 31, 2007 @ 8:16PM ET | Link | RSS | Read via Email | Start a Discussion  

Visually stunning and intuitive to use, the PowerTools trading system automatically generates buy and sell signals for any market and can be used with tick, intraday and daily charts.

AAPL Daily Chart with PowerTools Trading System

BUY RULE: When the trading system is on a sell signal, blue dots will appear above the pink price bars to indicate the stop loss/reversal point; if price *closes* above the dot, a buy signal will be issued.

SELL RULE: When the trading system is on a buy signal, pink dots will appear below the blue price bars to indicate the stop loss/reversal point; if price *closes* below the dot, a sell signal will be issued.

What’s Included

The complete trading system is contained within one file: PT-TradingSystem.efs. It is installed at the same time as the eSignal Advanced Charting software.

To apply the TradingSystem, right click on a blank area of the chart, select Add-On Studies > PowerTools > click PT-TradingSystem.efs. That’s all!

Monthly Subscription: US$49

The PowerTools trading system is available by monthly subscription directly from eSignal. Simply add PowerTools to your eSignal account at your convenience. If you’ve never used eSignal, try their charting service with a 30-day trial (excludes exchange fees and PowerTools subscription).

Swing traders should consider eSignal End-of-Day. You get all the stock and futures data you need, plus PowerTools for less than $75 per month.

Technical Specifications

PowerTools is designed for pure directional trading.

eSignal Advanced Charting Study Properties BoxBuy signals, sell signals and trade logistics discussed in Chapter Four of Own The Zone are calculated according to individual symbol settings and the parameters listed below.

To change any of the parameters or preferences, right click on a blank part of the chart and select Edit Studies. Use the dropdown menu in the Study Properties box, select PT.TradingSystem.

eSignal Symbol Settings

Launch a chart. Select the symbol and interval (tick, intraday or daily).

ONCE PER SESSION: There appears to be a software bug that causes improper initiation of the PowerTools Trading System. Each time eSignal Advanced Charting is launched, open any page (click Page > Open Page) where PT-TradingSystem.efs is applied to a chart. Click Page > Reload Page to recalculate. For the remainder of the session, PT-TradingSystem will function as intended on all other pages.

PT.TradingSystem Default Settings
PT.TradingSystem Default Settings

OwnCapital (in dollars): Default = 50000

Enter the amount of capital you will contribute. For example, if you have $50,000 in capital and wish to trade 10 stocks with equal dollar weighting, apply the TradingSystem to ten chart windows (one window for each stock symbol), each beginning with OwnCapital = 5000.

PercentOwnCapital (percent): Default = 50

This is the margin calculation. If you use a cash account with no funds borrowed from your broker, enter PercentOwnCapital = 100 since you are contributing 100 percent of the funds.If you trade stocks on an overnight basis in a typical margin account with Regulation T limits, enter PercentOwnCapital = 50 since you are contributing 50 percent of the funds.Pattern day-traders using 3:1 intraday margin should enter PercentOwnCapital = 25 since you are contributing 25 percent of the funds.

Futures and FOREX generally require very low initial and maintenance margins. For example, intraday margin for most stock index futures contracts is typically 3%. If ES (CME E-Mini S&P 500) is trading at 1,500, then one contract represents $75,000; $1,750 intraday margin works out to OwnCapital = 2.33, 42:1 leverage. If ER2 (CME E-mini Russell 2000) is trading at 850, then one contract represents $85,000; $2,000 intraday margin works out to OwnCapital = 2.35, 42:1 leverage.

Explore the effects of leverage by applying the eSignal Back Testing Tool over a range of values for the PercentOwnCapital parameter. Additional information on backtesting is provided at the bottom of this page.

DollarsPerPoint: Default = 1

For stocks, use the default setting as each 1 point move = $1.00. Futures and FOREX are different, and user must provide the DollarsPerPoint in order for the TradingSystem to calculate the appropriate position size.

How to calculate DollarsPerPoint for:

ShortFactor: Default = 0.5

Given the challenges of shorting (see Chapter Four, Own The Zone), the ShortFactor parameter was added to help users formulate their own shorting policy by exploring the effects of ratios other than the standard 1:1 short vs. long size using eSignal’s Back Testing Tool. Default = .5 means that the TradingSystem executes short positions at 50% of “full size”.

StopFactor: Default = 1.5

To reflect the probabilistic nature of trading, the reversal points and stops (see Chapter Three, Own The Zone) were calibrated to be adaptive and robust rather than perfect (see Chapter Two, Own The Zone).

The StopFactor parameter was added to allow users to explore the effects of tightening or loosening stops with the eSignal Back Testing Tool. For tighter stops, use values less than 1.5.

FilterLength: Default = 40

The default length of the TrendFilter (see next parameter) is a 40-period weighted moving average, a setting suited to swing trading off the daily chart. An intraday example is provided in Chapter Four, Own The Zone. Users can explore the effects of other settings using eSignal’s Back Testing Tool.

PT.TradingSystem Default Settings
PT.TradingSystem Default Settings

Use TrendFilter?: Default = T (true)

The TrendFilter allows users to avoid contratrend trades and facilitate multiple time frame trading. Use of this parameter is documented with examples in Chapter Four, Own The Zone. T = ON, F = OFF

Use Pyramiding? Default = T (true)

The TradingSystem will capitalize on profitable trades on the long side. The algorithm is built in. T = ON, F = OFF.

Notation

When the TrendFilter is ON,

When the TrendFilter is OFF,

When Pyramiding is ON,

Others,

The trading system will NEVER be long and short at the same time.

Alerts

Track pending buy and sell signals with the eSignal alert system. You can customize alerts to use sound, popup or email, and even change the sound file.

PT.TradingSystem Default Settings
PT.TradingSystem Default Alert Settings

By default, all alerts are OFF. T = ON, F = OFF.

The Back Testing Tool

Back testing is easy to do. Simply right click on a blank area of the chart, select Tools > Back Testing. You can backtest the PowerTools trading system as far back as eSignal data permits.

Back testing with eSignal Advanced ChartingChoose the desired time template, and load PT-TradingSystem.efs as the Formula of choice by clicking the small square button with “…” on it. (Click to enlarge image). If you have the typical eSignal installation, the EFS file will be in

C:\Program Files\eSignal\Formulas\Advanced\PowerTools

Back testing preference gives users the choice of evaluating “long only” or “short only” trades. The trading system position sizing algorithm overrides the “default lot size” input settings.

The time frame and look-back period for back testing is based on your time template. eSignal Central knowledgebase article #2797 has a video on time template basics. To change the time template on a chart, right click on the chart > select Time Template > Edit.

For more information on back testing, please read this article in the eSignalCentral knowledge base.

DDE To Microsoft Excel

The PowerTools trading system is pre-coded for quick dynamic data exchange with Microsoft Excel. You can track your entire portfolio in realtime, and know exactly how far your position is from a buy or sell signal. You can also use Excel to calculate and hedge your exposure.

For additional information regarding the DDE to Excel feature in eSignal Advanced Charting, please visit the eSignalCentral Knowledge Base.

Credits

While I owe the eSignal engineering team many thanks (Todd P, Todd G) for their help, this upgrade would have been impossible without Chris Kryza of Divergent Software. His dedication and excellence in EFS programming is unparalleled.