Nov
29
Prologue for TradeStation 8.x includes a complete trading system and a number of analytics:
- _Prologue.Strategy (trading system)
- _Prologue.PaintBar
- _Prologue.Stops indicator
- _Prologue.Scanner (for RadarScreen)
- _Prologue.Range (%) indicator
- _Prologue.SwingLines indicator
The Prologue Trading System
The trading system has three components: strategy, paintbar and indicator.
1. _Prologue.Strategy
This is the core component. Developed by Teresa for her own use, the strategy provides traders with a definitive edge in directional trading because of its ability to generate entries and exits appropriate for both swing and intraday trading.
Visually stunning and intuitive to use, the _Prologue.Strategy automatically generates buy and sell signals for any market, and calculates precise position sizing for tick, volume, intraday time and daily charts.
Intraday Index Futures: ESZ08, 2,500-tick Bars
September 11 - November 26, 2008 between 14:00 - 16:00 Eastern
$67,475 Total Net Profit Before Commission
$50,000 starting capital, 1:4 leverage
Use Format Strategies > Format > Entries/Exits Tabs to adjust labels, arrows, etc. associated with _Prologue.Strategy.
Intraday Index Futures: ESU07, 2,500-tick Bars
June 7 - September 13, 2007 between 14:00 - 16:00 Eastern
$24,287.50 Total Net Profit Before Commission
$50,000 starting capital, 1:4 leverage
(Results UNRETOUCHED from InVivo.System User Manual)
2. _Prologue.PaintBar
Apply _Prologue.PaintBar to color price bars or candlesticks. Visually confirm the status of a trade SIGNAL (not actual order) generated by _Prologue.Strategy.
Visual Confirmation of Signals Generated by _Prologue.Strategy
If there are no bars colored and no arrows indicating buy/sell signals, check all strategy settings AND scroll back in time to see if your chosen parameters (excessive leverage? bad stock picking?) bankrupted the system.
3. _Prologue.Stops
_Prologue.Stops is an indicator that should be plotted onto a chart with _Prologue.System. See InVivo Universal Stop for complete details.
Apply _Prologue.Stops to track entry/exit points and trailing stops according to the rules below:
- 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; a buy signal will be issued upon a *CLOSE* above the dot.
- 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; a sell signal will be issued upon a *CLOSE* below the dot.
- The trading system will NEVER be long and short at the same time.
Be sure to check the StopFactor settings of _Prologue.Stops and _Prologue.Strategy to make sure they are the same in order to view the correct stops.
_Prologue.Strategy Variables and Parameters
Good trading is often counter-intuitive. Prologue lets you test some popular — but unprofitable ideas — without having to write a single line of EasyLanguage code.
TradeStation allows users to backtest _Prologue.Strategy as far back as data permits, and also reads third-party ASCII as well as end-of-day Metastock data formats. Take advantage of TradeStation’s new Trade Simulator to practice without risking capital.
_Prologue.System Variables
The trading system contains a number of variables with parameters that can be adjusted. Be sure to nail down trade logistics discussed in Chapter Four of Own The Zone.
TradeStation Symbol Settings
Launch a bar or candlestick chart. Select the symbol and interval (tick, volume, intraday time or daily). Intraday traders should consider using 24-hour tick or volume charts to reduce the effects of gaps and expanded range bars.
Make security and time frame selection your top priority. Your success depends upon it. Time and again, we have seen that a wide range of intraday trading “problems” tend to be resolved by trading higher-priced, high-volatility issues in larger time frames with the stops proportional to volatility and range while simultaneously reducing trade size/ leverage.
OwnCapital: Default = 100000 (dollars)
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 _Prologue.System to ten chart windows (one window for each stock symbol), each beginning with OwnCapital = 5000.
Another example: If there are 9 stocks you like, but there is one you like a lot, divide the capital into 10 equal chunks. Allot 1/10 to eight of them and 2/10 to the one to overweight. With numbers: If you have $100,000, open 9 charts. OwnCapital = 10000 for eight charts while OwnCapital = 20000 for your favorite.
PercentOwnCapital: Default = 50 (percent)
This is the margin calculation. If you trade a cash account with margin, 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. If you enter PercentOwnCapital = 50 and OwnCapital = 100000, then the strategy will start with $200,000.
Pattern day-traders using 3:1 intraday margin should enter PercentOwnCapital = 25 since you are contributing 25 percent of the funds.
Stock index, bond, currency and commodity futures 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 PercentOwnCapital = 2.33, 42:1 leverage.
Leverage: How Much is Too Much?
Explore the effects of leverage with TradeStation’s strategy testing engine. Click Format Strategies > (click) _Prologue.Strategy > (click) Format > select Inputs tab > (click) PercentOwnCapital > (click) Optimize and enter a range of values.
StopFactor: Default UniversalStop = True
The “tightness” of the stops is based on the StopFactor setting. The parameters can be changed so that users to explore the effects of tightening or loosening stops.
The default of UniversalStop = true dynamically calculates an appropriate StopFactor between 1.0 and 1.5 on a bar by bar basis. If you wish to set the StopFactor yourself, use the Inputs tab to enter UniversalStop = false along with the desired value for the StopFactor.
Tight or Loose Stop? Which is Best?
To reflect the probabilistic nature of trading, the stops (see Chapter Three, Own The Zone) were calibrated to be adaptive and robust (see Chapter Two, Own The Zone).
If you wish to test the stops with the TradeStation strategy testing engine, my suggestion is to investigate a range between 1 and 1.5 at 0.1 increments.
StopFactor settings under 1 are insufficient while settings larger than 1.5 are unnecessary. When it comes to directional trading, it is probably not possible to tighten the initial stop or trailing stop beyond what volatility dictates.
ShortFactor: Default = .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 TradeStation’s strategy testing engine. By default, the trading system executes short positions at 50% of “full size”.
Turning Shorting On and Off
To turn shorting OFF, (click) Format Strategies > (click) Short Sell dropdown menu > select OFF.
TrendFilter: TrendFilter = 0 (OFF)
The TrendFilter allows users to avoid contratrend trades. To turn on the TrendFilter, enter any number greater than 2. For example, if TrendFilter = 20, then the trading system will only issue buy signals that INITIATE ABOVE the 20-period weighted moving average AND will only issue short sell signals that INITIATE BELOW the 20-period weighted moving average.
TrendFilter Avoids Contratrend Short
NOTE: Unlike previous versions, TrendFilter will ONLY issue signals that INITIATE above/below the chosen moving average.
Buy signals generated by the strategy when the TrendFilter are marked “TFLE” for “TrendFilter Long Entry” while short sale signals generated by the strategy when TrendFilter is on will be marked “TFSE” for “TrendFilter Short Entry”. When TrendFilter = 0 (OFF), buy signals are marked “LE” for long entry while short sale signals are marked “SX” for short entry.
Remember, when the system is out of the market — when there is no buy or sell signal on — the price bars will not be colored by _Prologue.PaintBar. Use of the TrendFilter is documented with examples in Chapter Four, Own The Zone. Users can explore the effects of other settings with TradeStation’s strategy testing engine.
Pyramiding: Default = ON, up to 50 times
Pyramiding is only allowed for LONG positions. By default, TradeStation settings are ON.
TradeStation Default = Pyramiding ON
When Pyramiding is ON, the Total (Running Total) refers to the total number of shares of the long position. To turn pyramiding OFF, (click) Format Strategies > Properties for All > UNCHECK “Allow up to X entry orders in the same direction”. Users can also limit the number of times a strategy will add to a position by changing the default from 50 to 2, for example.
Select Time: TradeStart and TradeEnd for Intraday Charts
It is often more profitable to restrict intraday trading to certain periods of the day rather than trade all day or all night. Use TradeStart to tell the system when to begin and TradeEnd to tell the system when to stop issuing signals. By default (TradeStart = 0 and TradeEnd = 0), not restricted by time.
The time filter is in 24 hour time. This means that trading can be set to start on one day, ending on the next. Exits generated by the time filter are marked “EOS” for “End of Session”.
RangeFilter: Default = 1 (ON), RangeDev = 3
Sudden, extreme volatility is generally a time to stand aside or move into a smaller time frame. “Psychotic chop” is something to stay away from.
When the RangeFilter is on, the strategy will stop issuing signals to open new trades when Range is larger than the RangeDev setting. RangeDev can ONLY be set to 3, 4 or 5 standard deviations. To turn off the RangeFilter, set it to 0 (zero). Range can be plotted using the _Prologue.Range (%). More below.
Alerts and Trade Automation
There are two ways to track pending buy and sell signals with the TradeStation alert system. The first method is to generate them using the _Prologue.Stops indicator.
Enter Alert Inputs for _Prologue.Stops
To enable alerts, (click) Format Analysis Techniques > (select) _Prologue.Stops > Format. Use the Inputs tab to select how close (in percent) you wish the current price to be to the reversal point/stop loss for an alert to be triggered. Be sure to adjust the StopFactor and TrendFilter to match the settings in _Prologue.Strategy.
You can choose to be notified of alerts by means of an audio notification, visual notification, and/or email messaging. You can set up a single notification type for a specific alert or use a combination of notifications. For example, for News alerts, you might want to receive an email notification along with a sound alert.
Select Alert Types and Settings for _Prologue.Indicator
Use the Alerts tab to select and configure the type and duration of the alert.
Select Alert for _Prologue.Strategy
Alerts can also be generated using _Prologue.Strategy. For alerts, (click) Format Strategies > (select) _Prologue.Strategy > Format. Check the “Generate strategy orders for display in TradeManager’s StrategyOrders tab” box on the lower left-hand corner.
Trade Automation with _Prologue.Strategy
For intraday orders check the “Automate execution” box below to automate trade execution via TradeStation brokerage.
Strategy Automation with TradeStation Brokerage
_Prologue.Strategy will ONLY generate buy and sell orders. It WILL NOT generate or transmit TRAILING stop orders.
Prologue Studies and Scanner
In addition to _Prologue.Stops and _Prologue. PaintBar, there are also two more studies included.
_Prologue.Range Indicator
Range (spikey red line) is expressed in percent. Grey line is the 3 (4 or 5) standard deviation of range. Generally, large range is seen in the mornings when discretionary trading using hit and run techniques from The Ultimate Trading Course is more appropriate.
_Prologue.SwingLines Indicator
Plotting swing lines helps train the eye by making it easier to spot patterns such as flags, pennants, ABC corrections and triangles.
_Prologue.Scanner for RadarScreen
CLICK TO VIEW LARGER IMAGE
Unleash TradeStation RadarScreen to monitor, rank and sort in real-time. Format the indicator to adjust StopFactor, Range and Alerts. When a buy or sell signal is issued, the cell containing the buy or sell stop price lights up!
Aug
29
InVivo Universal Stops are engineered to reflect actual volatility and range, providing users with a real edge over other so-called volatility-based indicators or bands.
Used alone, InVivo Universal Stops is known as a stop and reverse system, that is, it is always in the market long or short. In practice, traders qualify trades by imposing additional conditions such as a time filter, trend filter, a moving average filter, etc. In addition, they must also decide on the amount of leverage to use and calculate the position size based on the foregoing.
Use InVivo Universal Stops according to the following two rules:
- BUY RULE: A *close* above a blue dot is buy signal.
- SELL RULE: A *close* below a pink dot is a sell signal.
While the math behind InVivo Universal Stops is complex, using this indicator is easy as 1-2-3. InVivo Universal Stops shows you the exactly where your stop should be at all times. The stops can also be used to buy and sell options, particularly our “Plan B” bull call or bear put spreads.
Indicator Inputs for InVivo.Stops for eSignal 10.x
Assuming that eSignal Advanced Charting is installed on your C: drive and you saved the EFS file to My Computer > C: > Program Files > eSignal > Formulas > Advanced > PowerTools folder, apply InVivo.Stops as you would any other indicator and click Chart Options > Edit Studies to adjust the settings, including Alerts.
Apply the indicator by
- left clicking on the background of a chart to activate it,
- right clicking on a blank part of the chart to bring up the menu,
- scrolling down the menu, select Add-On Studies > PowerTools > InVivo.Stops.efs
OR find CHART OPTIONS on the menu along the top and select Add-On Studies > PowerTools > InVivo.Stops.efs. This will apply the indicator to whatever chart is active.
NOTE: If your file does not feature alerts, let us know — you are using an older version!
The “tightness” of the stops is based on the StopFactor setting. The default is set to UniversalStop = True. The indicator dynamically selects an appropriate StopFactor setting between 1.0 and 1.5. You can also manually select a StopFactor.
If you wish to set the StopFactor yourself to accommodate your style of trading, use the Inputs tab to enter UniversalStop = false along with the desired setting for the StopFactor. Investigate a range of settings between 1 and 1.5 at 0.1 increments. StopFactor settings under 1 are insufficient while settings larger than 1.5 are unnecessary.
In trend (directional) trading, it is perhaps not possible to tighten the initial stop or trailing stop beyond what volatility dictates. Time and again, we have seen that a wide range of trading “problems” tend to be resolved by trading high-priced, high-volatility issues in larger time frames while simultaneously reducing trade size/leverage with the use of reasonable stops.
ALERTS
Alerts are set to go off on the first tick of the first bar after a signal change.
Aug
29
InVivo Universal Stops are engineered to reflect actual volatility and range, providing users with a real edge over other so-called volatility-based indicators or bands.
Used alone, InVivo Universal Stops is known as a stop and reverse system, that is, it is always in the market long or short. In practice, traders qualify trades by imposing additional conditions such as a time filter, trend filter, a moving average filter, etc. In addition, they must also decide on the amount of leverage to use and calculate the position size based on the foregoing.
Use InVivo Universal Stops according to the following two rules:
- BUY RULE: A *close* above a blue dot is buy signal.
- SELL RULE: A *close* below a pink dot is a sell signal.
While the math behind InVivo Universal Stops is complex, using this indicator is easy as 1-2-3. InVivo Universal Stops shows you the exactly where your stop should be at all times. The stops can also be used to buy and sell options, particularly our “Plan B” bull call or bear put spreads.
Indicator Inputs for _InVivo.Stops for TradeStation
The “tightness” of the stops is based on the StopFactor setting. The default is set to UniversalStop = True. The indicator dynamically selects an appropriate StopFactor setting between 1.0 and 1.5. You can also manually select a StopFactor.
If you wish to set the StopFactor yourself to accommodate your style of trading, use the Inputs tab to enter UniversalStop = false along with the desired setting for the StopFactor. Investigate a range of settings between 1 and 1.5 at 0.1 increments. StopFactor settings under 1 are insufficient while settings larger than 1.5 are unnecessary.
In trend (directional) trading, it is perhaps not possible to tighten the initial stop or trailing stop beyond what volatility dictates. Time and again, we have seen that a wide range of trading “problems” tend to be resolved by trading high-priced, high-volatility issues in larger time frames while simultaneously reducing trade size/leverage with the use of reasonable stops.
DEFAULT: PctToStopAlert = 1.01
The alert is set to ring when price is within 1.01% of the stop. Use the Alerts tab to set your own preferences.
TrendFilter should always be set to zero. No adjustment is necessary.
