Designing and Building a Profitable Automated Trading System

Renamed the old Trade Log to Signal Chart because its function and value have changed significantly for the good. Feel free to delete the old Trade Logs.

Have made progress on the binary side. The Signal Chart is 2^3 (2 to the power of 3) times better than the prior version.

The workproduct that I release will tend to be intermediate work-in-progress type stuff. I try to find a good publishing point even though I haven't completed all open action items. For example, I only have a couple binary MACD columns on far the right of the chart -- not all the MACD stuff yet. Since I now understand and have codified the binary Stoch logic, the MACD should not be too hard.
 

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Quote from jack hershey:

...I didn't get how you did suppression in you coing post. If you just snag the pertinent lines for my convenience and also tell me if they are generic (apply all the time where applicable).
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Time Suppression applies generically to all potential entry and reverse conditions.

Volume Supression applies generically to all potential entry and reverse conditions.

MACD Supression is expressed for longs and shorts and applies generically to all potential entry and reverse conditions.

Let me know if it might help for me to break it down further with some more detailed narrative of the key chunks.

Code: 
[b]//Data Module[/b]
variables:
Stoch5FastK( 0 ), Stoch5FastD( 0 ), Stoch5SlowK( 0 ), Stoch5SlowD( 0 ),
Stoch14FastK( 0 ), Stoch14FastD( 0 ), Stoch14SlowK( 0 ), Stoch14SlowD( 0 ),
MACDVal( 0 ), MACDMA( 0 ), MACDDiff( 0 ),
TimeOK(False),
VolumeOK(False),
CurrentbarOK(False),
LongOK(False),
ShortOK(False),
DateOK(False);

[b]//Formula Module[/b]
Value1 = Stochastic( H, L, C, 5, 2, 3, 1, Stoch5FastK, Stoch5FastD, Stoch5SlowK, Stoch5SlowD ) ;
Value2 = Stochastic( H, L, C, 14, 1, 3, 1, Stoch14FastK, Stoch14FastD, Stoch14SlowK, Stoch14SlowD ) ;
MACDVal = MACD( Close, 5, 13 ) ;
MACDMA = XAverage( MACDVal, 6 ) ;
MACDDiff = MACDVal - MACDMA ;

[b]//Context Supression Logic[/b]
if Time > 945 and Time < 1600  then TimeOK = True else TimeOK = False;

//This level is tuned to Slow Pace of 16700 in the next version.
if Volume of 1 bar ago > 20000 then VolumeOK = True else VolumeOK = False;

//Housekeeping for MultiCharts.  Ignore this.
if currentbar > 2 then CurrentbarOK = True else CurrentbarOK = False;

//Needs to be validated and then tuned.
if MACDDiff > 0 then LongOK = true else LongOK = false;

//Needs to be validated and then tuned.
if MACDDiff < 0 then ShortOK = true else ShortOK = false;

//Only used during testing phase.  Ignore this.
if date = 1081210 then DateOK = true else DateOK = false;

if CurrentBarOK and TimeOK and DateOK then
begin
	
	[b]//Entry Logic[/b]
	if VolumeOK then  //enter only when volume greater than 'Medium'
	begin
		if LongOK and Stoch5FastK crosses above 50
		and Stoch5FastK > Stoch5FastD and marketposition = 0 then                                 
			Buy ( "S5FKLE" ) 1 contract this bar at close ;

		if ShortOK and Stoch5FastK crosses below 50
		and Stoch5FastK < Stoch5FastD and marketposition = 0 then
			Sellshort ( "S5FKSE" ) 1 contract this bar at close ;
	end;

//SNIP --------------------
 
Quote from ScottD:

Code: 
//Data Module
variables:
Stoch5FastK( 0 ), Stoch5FastD( 0 ), Stoch5SlowK( 0 ), Stoch5SlowD( 0 ),
Stoch14FastK( 0 ), Stoch14FastD( 0 ), Stoch14SlowK( 0 ), Stoch14SlowD( 0 ),
MACDVal( 0 ), MACDMA( 0 ), MACDDiff( 0 ),
TimeOK(False),
VolumeOK(False),
CurrentbarOK(False),
LongOK(False),
ShortOK(False),
DateOK(False);

//Formula Module
Value1 = Stochastic( H, L, C, 5, 2, 3, 1, 
Stoch5FastK, Stoch5FastD, Stoch5SlowK, Stoch5SlowD ) ;
Value2 = Stochastic( H, L, C, 14, 1, 3, 1, 
Stoch14FastK, Stoch14FastD, Stoch14SlowK, Stoch14SlowD ) ;
MACDVal = MACD( Close, 5, 13 ) ;
MACDMA = XAverage( MACDVal, 6 ) ;
MACDDiff = MACDVal - MACDMA ;

//Context Supression Logic
if Time > 945 and Time < 1600  then TimeOK = True else TimeOK = False;

//This level is tuned to Slow Pace of 16700 in the next version.
if Volume of 1 bar ago > 20000 then VolumeOK = True else VolumeOK = False;

//Housekeeping for MultiCharts.  Ignore this.
if currentbar > 2 then CurrentbarOK = True else CurrentbarOK = False;

//Needs to be validated and then tuned.
if MACDDiff > 0 then LongOK = true else LongOK = false;

//Needs to be validated and then tuned.
if MACDDiff < 0 then ShortOK = true else ShortOK = false;

//Only used during testing phase.  Ignore this.
if date = 1081210 then DateOK = true else DateOK = false;

if CurrentBarOK and TimeOK and DateOK then
begin
	
	//Entry Logic
	if VolumeOK then  //enter only when volume greater than 'Medium'
	begin
		if LongOK and Stoch5FastK crosses above 50
		and Stoch5FastK > Stoch5FastD and marketposition = 0 then             
			Buy ( "S5FKLE" ) 1 contract this bar at close ;

		if ShortOK and Stoch5FastK crosses below 50
		and Stoch5FastK < Stoch5FastD and marketposition = 0 then
			Sellshort ( "S5FKSE" ) 1 contract this bar at close ;
	end;

//SNIP --------------------

Time Suppression applies generically to all potential entry and reverse conditions.

Volume Supression applies generically to all potential entry and reverse conditions.

MACD Supression is expressed for longs and shorts and applies generically to all potential entry and reverse conditions.

Let me know if it might help for me to break it down further with some more detailed narrative of the key chunks.
More...

Thanks so much.

Your telling me this was very helpful to me better understand your orientation. I can get more specific rather than just sketching on the chart. This is a good way to do iterative refinement.

the reason why I use the twp STOCH's has to do with separating the entry signal from the exit signal. And you also see the 2 for smoothing in the STOCH (5, 2, 3) and how I kept the STOCH (14, 1, 3) jumpy with the traditional 1.

The MACD is trimmed down to 13 to be a little "inside" the STOCH's and I want to stop bridging when the PC was invented.

When we get the PACE to show up as a result of a 1600 bar non stationary lookup set of tables we can run over to the top right box on the overall indicator function chart and do some specific suppression.

We could do a script (short transportable coding routine) or two to show how to suppress 3BR traps as well as the chop whiplash already mentioned.

A while from now we can just leave the price off the chart and just post a combo log that shows the biary logic line feeds and the trading results. By just having eveything in binary and picking up the rep rate of the rows (intrabar cycle rate) on the Excel log, we can go from Beginner to Intermediate and then to Expert.

What I believe this coding will do for learners is allow them to do many days of practice in a short while (an evening after work, for example) on each skill level we code up. Staying out of repeated failure is one of the major keys of building coherence in personal critical thinking.

I haven't been able to open the Excel sheet and I tried four times. The count of others opening it is low too (0). Can we just show so many rows at a time to make it transfer within the ET limits. Getting it posted must meand it can be viewed somehow.
 
To introduce a little bit of MACD indicator usage. Take a look at the Histogram.

The peaks and troughs of the histograms are where D and C change binarily.

The periods of C or D are important and so is the peak switch in long or short trade HOLD context when D goes to C indicating the maximum money velocity happened. Often this happens as a lead in to opening the "end effects" pane in the non stationary window that the math of the indicators resides in (except for beginner volume which can stretch out longer).

MACD is an absolute value indicator so it is unaffected by bar volatility and the slope of the price trend (we do not use this (trending) because our indicators are substitudting for trend analysis).

The max and min of the slow line on MACD is always reached as the fast line crosses the slow line. We will use this since it always folows the D to C time. This time of crossing is a C to D time.

For trading on beginner levels the above four occurences during "away" values of MACD dictate the trading. what happens to Beginners who use the non "away" C to D crossovers is that they get into whipsaw volatility size repeated rapid losses.

What is not on the table are the very laggy fast and slow line "zero line" crossover points which ly "outside" of the "end effects" pane in the non stationary indicator window.

On the A B C D waveform chart we often see "entwining". Beffore we get into Intermediate and Expert we can use this phenomena (coded) as a action (trade) suppressor (or more importantly, a Beginner HOLD continuing signal). Entwining is the PA "early exit" cure and the PA "whiplash" cure.

Right now, you are using suppression coding for the C portion of the A B C D waveform meaning when the MACD diff is positive for long trades and negative for short trades. The ST5FE signals longs and shorts before this suppression begins.
 
This stuff is just flying over my head.

I guess I'll just have to see what comes out of it. Scott is doing a good job of understanding of what is going on. I know I have no clue what is being discussed.
 
Quote from nkhoi:

ES 5m chart with 50 line for stoc5
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Thanks so much for posting.

The annotations show the entry in pink off the STOCH (5, 2,3) and exits off the STOCH (14, 1, 3). When the trade has no exit but does have a signal a reversal is used.

This is what the coding of an ATS sees without using price bar information directly in the coding.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2219835 width=800>

The thick colored horizontal bars are Long (black) and Short (red)trades as well as sidelines in yellow.

I showed one waveform A B C D as a reminder. The over all pattern of most of the day is an inverted saucer formation that ends and another half inverted saucer begins.

There are some areas labelled.

The 30 in red is the "30 minute one trade a day" on synch BO. This begins on bar 2 for this day 12DEC08. There is a trade each day that begins therenge expansion for the day.

The X is two fast reversals where the C to c spread would be given up if end of bar trades were done.

The Y is a suppression condition we will be adopting as the coding scripts get done. The MACD will be used for suppression as much as volume PACE will be used when we get those two lookup tables in gear. The overlap look up will be used for taking advantage of bar ends H to L or L to H and the volatility will be used with a clock to hold through dominant internals as detected by overlap only. How we use the indicators for this will be clear later.

Z has a high corrolation with Y. We can AND the outputs of the logic for both along with C and D signals in the logic to habdle "end effects" of the two patterns.
 

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This is the whole display where the signal lines are extended to the price.

Additional note on MACD. You can see it is labelled with two absulute values 1.4 and -1.4 for the 5 minute chart. these are the rocket values from a while back. For Beginners there were no rocket entries allowed if the values were not exceeded.

You can see that the preopen and bar one were in overlap and the market volume on open gave good volatility.

At some point the meaning of all of these things says "go for it" or "Just Do It' if you wear sneakers.

There are many open strategies used om various markets.

We separated the entry and exit indicator signals on the STOCH's. The STF5 gave us an early entry even though, for now, we are just using market trades with closing signals or doing mechanically what is called "hitting T". By setting up your trading platform in advance for an assortment of trades (entry, exit and reversal), you can just ACT by executing when you observe the indicator signal. the signals "flap" and the flapping is left or right. Flapping to the right is with the sentiment and flapping to the left is against the sentiment.

To trade you need to deal with price trending in a left and right orientation (horizontal). By doing so you get to develop a neutral bias for making money, the objective of trading.

The open on Friday was an "early hit T" as the indicator got "right" into the trend.

<img src=http://elitetrader.com/vb/attachment.php?s=&postid=2219912 width=800>
 

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As you can see on the annotated chart, the periodicity of the defaults on the indicators are comming into view.

As this focus sharpens from viewing and annotating charts as they unfold (we are getting to that and this comment will help), the meaning of non stationary window and the "end effect" pane in the non stationary window will settle down in your mind.

Below is a view of the period (13 or 14 bar window) and the pane that suggests when to end the profit making segement.

Let it soak in See the price cycle in the window this is where the data comes from to make up the vaules of the indicators. You can see how Lane got the idea of using the low extreme as a reference to the closes as they pop into the window one after another. when we go to intrabar on the coding a lot of the ime the close value being fed will be coincident with one end of the bar and we can take advantage of this as time passes.

The display only "fixes" history and we get the advantage of the flapper portion of what is happening "inside" the bar when we go to more precision.

Here is a drill:

From 10DEC08 onward use paint or equivalent to make a collection of files that show nonstationary windows such as the one I have posted in this post. Each one should have two complete panes.

Draw the panes as goldrectangles in the window as I have done here.

attachment.php


On a print of the file, number the event indicator signals that you can percieve in the time order in which they occur for each pane.

At the bottom of the print sheet, write columns of information from left to right:

A. Event number

B. Event name

C. Event price

The list with the three columns so far will be the trading profit segement going from an entry near the top and an exit near the bottom.

D. In this column put and entry and exit price. At the bottom of the column put the net profit.

E. repeat D with better entry.

F. repeat E with better exit.

G. Put in the best values of all.

From this you see How the MACD is going to be very helpful to us. You also get to see how signal "confirmations" work.

There are some parts of the day you didn't use. these parts require more skills for trading. By doing this first drill, though, you got to divide the day into parts you used and parts you didn't use.

What you learn from this is how to look at the width of the chart doing a "lookback" to understand how trading segments are unfolding in terms of the indicators.

Make a list of the order of importance of the MACD signals you wrote on the list. Did you notice that the "zero line" cross over is not on your list? The answer is yes.

To see how smart you are count the number of files you made. Low numbers indicate dumbness and high numbers indicate smartness.

The first 100,000 non stationary windows you can count as seen are the ones where the last 10,000 are more or less automatic and you "know that you know".

What we found out in the drill is that to get to advanced beginner takes the ability to "see" panes and see the signal to trade and the confirmation signals. It looks like after an entry you have about 30 minutes or more on your hands until you get the the event that signals the profit taking.

Snip out your list and see if you can glue the ends together and make a quarterback trading bracelet. Get Tiffany's to make one for your wife or GF or partner for the holidays. She will let you wear it during RTH's and you let her wear it after hours.

Where did you live when you opened your Tiffany account? Poughkeepsie for me.
 

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