Prologue for TradeStation
Prologue is a program — a unique combination of knowledge base, trading system and toolbox — designed to arm traders with professional insight and a quantifiable edge.
If you are interested in trading futures (e-mini index, currency, etc., but NOT Forex) or stocks on an INTRADAY basis, we can help. If you are position trading stocks from daily charts, please use our swing trading tools.
Prologue \Pro”logue\, n.
Middle English prolog, from Anglo-French prologue, from Latin prologus preface to a play, from Greek prologos part of a Greek play preceding the entry of the chorus, from pro- before + legein to speak. 14th century.
- The preface or introduction to a discourse, poem, or performance; as, the prologue of Chaucer’s “Canterbury Tales;” esp., a discourse or poem spoken before a dramatic performance.
- One who delivers a prologue. [R.] –Shak.
- To introduce with a formal preface, or prologue.
To make the most of Prologue, you should:
- Be prepared to do homework;
- Have a subscription to TradeStation 8.x;
- Watch the market and practice trading (paper or simulation) until it becomes second nature;
- Memorize course material provided; and,
- Own a late-model Windows PC;
The Ultimate Trading Course
The knowledge base portion of the program comes from The Ultimate Trading Course. We give you straight talk about trading before you trade: just the facts, no hype, B.S., or false promises.
Prologue for TradeStation 8.x
The toolbox portion of the program includes my personal trading system and trading tools:
- _Prologue.Strategy (trading system)
- _Prologue.Scanner (for RadarScreen)
- _Prologue.Range (%) indicator
- _Prologue.Stops indicator
- _Prologue.SwingLines indicator
- _Prologue PaintBar study
With Prologue for TradeStation, you will use a trading system that works. But don’t take my word for it. You can explore, back test various settings (leverage, trend filter, time filter, tick vs. time charts) and verify the results for yourself without any additional programming. You can also use the new trade simulator to gain experience — without risking a cent of your capital.
A Word About Intraday Trading
Let me share a few thoughts on the task of intraday trading with you. Because of the difficulties associated with stock picking, I personally do not daytrade stocks. I just don’t have the time, inclination or expertise to find the needles in the haystack day after day. It’s just not for me.
I would rather trade stock index futures or even currency futures simply because I can watch the price action over a period of time and learn how the tide moves in these markets. My secret is simple: most markets have a tendency to be more volatile in the first hour of trading than the rest of the day. From this simple observation, I use a strategy that is appropriate for these market conditions. Let me show you how.
Good From Far, But Far From Good
In The New Market Wizards: Conversations with America’s Top Traders, legendary trader William Eckhardt told author Jack Schwager that, “Anyone with average intelligence can learn to trade. This is not rocket science. However, it’s much easier to learn what you should do in trading than to do it. Good systems tend to violate normal human tendencies.”
Eckhardt was dead right. Good trading practices are frequently counterintuitive. Situations that look good from far are frequently far from good. Success is the result of using common sense, understanding the madness of crowds, and applying a handful of robust analytical tools.
The First Hour: Hit and Run
Take a look at this spreadsheet. Even though September 2008 was filled with market turmoil, when we look at the percentage change from bar-to-bar on the 5-minute chart of the e-mini S&P 500 index futures, the period reflected the usual types of days — gap up open, gap down open, sideways days and trend days — with small percent change bars during the middle third of the trading day.
Daily (81-bar) Range in Percent from the 5-Minute Chart
Another way to explore the data is to apply _Prologue.Range (%). We use this measurement in place of ADX. We can clearly see that the tendency is for the first part of the day to feature larger fluctuations while the rest of day tends to experience smaller percent changes from bar to bar. It is generally rare for a trend day to begin in the morning.
What does this mean for the trader? It means we use discretionary trade setups listed in The Ultimate Trading Course in the first hour: gap reversals, tests, flags. Course material also includes lavishly illustrated complete transcripts from past online seminars focused on trading e-mini stock index futures.
The most difficult part about the first hour is pulling the trigger. The trader is expected to make many decisions in a small amount of time. You probably need to watch the market you plan to trade for at least six month on a daily basis in order to feel confident enough to act decisively.
Rest of the Day: Play the Odds
Most people find the first hour too tumultuous to trade. They sit there and wait for what they believe is a low risk entry such as a retracement to the 20-period EMA, a breakout of the morning high/low or from a big pattern. But the market does not always cooperate, and often these entries become classic traps.
_Prologue.Strategy: CLICK TO VIEW LARGER IMAGE
There is good news: we can play the odds because most trends tend to materialize in the latter part of the trading day. We use stops and low leverage to manage risk in a responsible way. Trends are notoriously difficult to get on board, so my approach is to let _Prologue.Strategy trade e-mini S&P futures between 14:00 to 15:45 Eastern time. The strategy provides the discipline I need to capitalize on a trend to the fullest.
Let’s take a look at the performance of _Prologue.Strategy. One thing to remember is that the market can be choppy for extended periods of time. We need to use settings that capitalizes on trends and breaks even during range-bound markets.
Volatility of the S&P 500 Index during the June 08 Front Month
The one-month (21-day) historical volatility was contracting for two-thirds of the time when the June 08 ES was the front month contract. _Prologue.Strategy held it’s own, essentially breaking even over 96 trades on the conservative settings I have been using for a few years.
Volatility of the S&P 500 Index during the September 08 Front Month
The one-month (21-day) historical volatility was expanding for two-thirds of the time when the September 08 ES was the front month contract. _Prologue.Strategy generated a profit of $7,950 over 105 trades with $25,000 capital on MY conservative settings.
Volatility of the S&P 500 Index during the December 08 Front Month
The one-month (21-day) historical volatility exploded in the first ten days of trading after the December 08 ES contract become the front month contract. _Prologue.Strategy generated a profit of $4,275 over only 18 trades to September 19 with $25,000 capital on MY conservative settings.
It will serve you well to observe the markets that you trade, try these exercises and unleash the power of TradeStation to explore, back test and trade in simulation until you are satisfied with the results.
In Conclusion
I’ve given you my take on trading, one that was formed over a period of twenty years. You can learn what I know and use my tools with the Prologue program. I hope you will go on to be very successful in your trading endeavors and help me write the epilogue to this page. Cheers!
NOTE: Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
