May 26, 2011 | Uncategorized
Original article by Walid Khalil and David Steckler in Stocks & Commodities
AIQ Code by Richard Denning
The AIQ code for Walid Khalil and David Steckler’s article, “Entering The Price Zone”, is shown below. I coded both the Price Zone Oscillator (PZO) and Volume Zone Oscillator Indicator (VZO) (from the prior month’s article by the same authors) along with the system that uses the PZO or VZO indicator. There is an input at the top of the code called “usePZO”. When this input is set equal to “1” then the indicator and system use the PZO. If set to any other value, then the indicator and system use the VZO oscillator. I had to use my own interpretation of what the divergence sell/cover rules of their system mean since the exact code for this part of the system is not given in the article. Also note that the non-trending case is provided with this code but tests of the rule “BuyNoTrnd” showed that trading only when the market is trending was the better choice. As a result, my tests below were of only the trending portion of the system as I had done in last month’s tests.
I ran a back test using the Portfolio Manager module from 1/1/98 to 4/8/11 using the NASDAQ 100 list of stocks. In Figure 1, I show the test results of simulating trading the NASDAQ 100 list of stocks, using the following parameters for capitalization:
1) Maximum positions per day = 3
2) Maximum total positions allowed = 10
3) Choose candidates using ADX values in descending order
4) Size each position at 10% of total account equity recomputed every day
For the test period, the average annual return was 11.3% with a maximum drawdown of 67.7% on 02/07/03.
In last month’s issue, I ran a similar test using the VZO indicator and the results were slightly better than using the PZO indicator with this system.
The short side test was unsuccessful as the system lost all its capital during the early years of the test. These results are not shown in any figures. I tried adding an index trend filter but this did not save the short side from total loss.
Captions:
Figure 1 – PZO system equity curve trading longs only using the NASDAQ 100 list of stocks compared to the SPX index for the test period 1/1/98 to 4/8/11.
EDS Code for Entering the Price Zone:
EnterPriceZone.EDS
(right click and choose Save As)
May 25, 2011 | Uncategorized
Steve Palmquist.
Author of ‘The Timely Trades Letter’. ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns.
I got an interesting email from a potential trader who was concerned that trading might ‘take too much time’. Apparently the new bailout mentality in the country has people thinking they should be able to make a lot of money quickly with little investment in education, tools, or experience. Trading, like most other professions takes time to learn. It will take a couple of years, not a couple of weekends, to learn the process of trading. It takes time because traders need to see how things work in different market conditions, and it takes time for the market to cycle between these different conditions. On the other side, the actual trading process does not require one to be glued to a computer all day, it can generally be done in minutes. The trading systems I use are based on end of day data. They have been developed and tested by looking at daily patterns, not five minute charts. Since I trade the daily patterns, I do not need to see the five minute charts.
I run the scans, pick the setups, use market conditions to determine whether to focus on longs, shorts, or cash, and then implement the trading plan. It takes me less than thirty minutes to check the setups on the watch list if I do it manually, and less time if I have my broker text me alerts when a setup hits a price level of interest. It takes time to learn trading just like it takes time to learn to be a doctor, engineer, or electrician. Once the trading skills are learned, the actual time spent trading can be quite short.
Holding periods and profit taking should be based on current market conditions. Take profits quickly in trading range markets, and give positions more time to work in trending markets. In non trending markets holding periods are usually not more than a few days. In trending markets holding periods may be several weeks or months. In non-trending markets consider taking profits after the initial pop from the trigger. Look to exit as the stock approaches the Bollinger Band, a recent high, a trend line, or when the market approaches support/resistance.
In order to find out what the usual, or normal course of action is, I have extensively tested several trading systems, the results of this testing on specific trading trading tools are outlined in ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns. The testing process helps us understand how stocks usually behave after forming a specific pattern such as being outside the Bollinger Bands, showing strong distribution or accumulation, or pulling back or retracing during a trend. Understanding what a stock is most likely to do forms the beginning of a trading strategy.
May 19, 2011 | Uncategorized
Thank you for attending today’s webinar ‘How to identify signs of exhaustion in an up move’ is on Thursday May 19th, 4:30pm eastern.
If you missed the event or would like to review the session, the recording is now available
We will be scheduling a second event covering using the VIX and Volatility as an indicator of exhaustion in early June. We’ll keep you posted when the event details are available.
Presenter
Stephen Hill is CEO of AIQ Systems. For the past 15 years he has been involved in all aspects of AIQ Systems, from support and sales to programming and education. Steve is a frequent speaker at events in the U.S. and Europe, talking on subjects as diverse as Portfolio Simulation Techniques, Advanced Chart Pattern Analysis and Trading System Design.
May 15, 2011 | Uncategorized
Steve Palmquist.
Author of ‘The Timely Trades Letter’. ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns.
Successful traders examine the current market conditions to determine if they are bullish, bearish, or a trading range environment. Traders can determine which of the three modes the market is currently in by looking at a daily chart of the market action over the last year, using the 5X20 moving average filter, or through trend line analysis. I use each of these techniques for my own trading, and publish the analyses and trading setups in the Timely Trades Letter. After determining the current market environment, traders can select the tools from the their trading tool box that perform best in the current conditions. Having multiple trading tools that have been carefully tested and analyzed in each of the major market conditions is a key part of successful trading. If you trade the same tool all the time, or do not adapt to changing market conditions, you may get a lot of practice exercising stops.
Pullbacks are one of the bread and butter techniques of trading because they occur frequently and can be found in most market conditions. Most traders should have more than one pullback system in their trading tool box. There are interesting pullback systems based on the percentage of retracement, pullbacks to key moving averages, pullbacks for a specific number of days, and pullbacks with specific volume patterns. Specific pullback techniques and information on how they perform in different market conditions is covered in ‘How to Take Money from the Markets’. The book also shows specific techniques for adapting trading strategies and techniques to the current market conditions.In addition to adapting to the current market conditions by using the appropriate tools from the trading tool box there are several practical aspects of trading that traders need to master.
Never enter a position without having a plan for exiting the position. If you Do not know where to get out of a position you should not enter it in the first place. In swing trading time frames stocks often run to the next resistance or Support level and then stall. Stocks rarely remain outside the Bollinger bands for long, so when a position reaches the Bands it is often a good place to look at profit taking, especially in trading range environments. There is usually no need to rush in when the markets trend changes. Any trend worth trading does not require you to be in on the first day, by definition. Make sure that your position sizing is such that if all your current positions were stopped out that the total loss is something that is still comfortable. This happens from time to time, wishing it did not will not change it. Be prepared by using sensible position sizes.
May 10, 2011 | Uncategorized
FREE webinar Thursday May 19th, 4:30pm eastern
How do you know when the move up is over for a ticker? In this first of two FREE webinars, we’ll discuss several key signs that it’s all over including:
• Exhaustion Gap – how to identify it’s an exhaustion and not a runaway parabola.
• Rising Channel breakdown – you’ve ridden the channel riding out the pullbacks. We’ll cover the key elements that indicate this is not a pullback but a breakdown.
• Doji Candlestick – when it’s identified correctly it really means the move is over.
Sound interesting? Join me for this FREE webinar on ‘How to identify signs of exhaustion in an up move’
Thursday May 19th, 4:30pm eastern
Visit http://aiqsystems.com/webinarexhaustion.html to register.
Steve Hill
AIQ Systems
English 