In Part 2, of Designing a Trading System in MetaStock I covered how to code the first two of the four major components of a mechanical entry system. I had explained the coding of price and liquidity. In this article, I will cover the steps for coding the remaining two components, trend and volatility, into MetaStock. In the end, you will have the complete codes for a mechanical entry system.
Let`s begin with trend identification. Remember, `the trend is your friend` when trading. You always want to trade with the trend, not against it. Think of it this way, if you were swimming in the sea, and got yourself caught in a rip tide, is it easier to swim with the current or against it? It is the same with trading with a trend.
There are many ways to identify trends, and it`s not particularly important which method you use. You just need to use one. One of my preferred methods for identifying trending stocks is to find stocks that are trading at their current highs. You can do this by stipulating that the highest high price must have been achieved in the last `x` number of days.
Once again, the variables you use will depend on the time frame you are trading. But for this example, you want the highest high price in the last 240 days to have occurred in the last 20 days.
Using the formula reference section in the MetaStock Programming Study Guide, you can find the syntax of the highest high function, and then plug in the details. Then, using the `less than` symbol, you can specify the number of days must be less than 20. In MetaStock language that would be:
HHVBars(H,240) < 20
The final component to our entry system is the volatility measure. The aim of including this formula is to identify stocks that move enough for us to make a profit, yet aren`t so erratic that they keep you up at night. There are a few ways to measure volatility. However, my favourite is the ATR method. The ATR indicates how much a stock will move, on average, over a certain period.
For example, a one-dollar stock might move five cents on average over the last 20 days. You can divide this value by the price of the stock and you will have the average percentage movement of a stock. With these values, you can stipulate a minimum and maximum daily volatility value.
For example: You may want the ATR, divided by the average closing price, over the last 21 days, to be greater than 1.5%. Therefore, the average minimum volatility must be greater than 1.5%.
Additionally, you may want the ATR divided by the closing price, over the last 21 days, to be less than 6%. This sets the average maximum volatility at less than 6%. In MetaStock language that would be:
ATR(21)/Mov(C,21,S)*100 > 1.5 and
ATR(21)/Mov(C,21,S)*100 < 6
Putting all our code together, you see what your entry system looks like:
C>1 and
Mov(v,21,s)*C > 200000 and
HHVBars(H,240) < 20 and
ATR(21)/Mov(C,21,S)*100 > 1.5 and
ATR(21)/Mov(C,21,S)*100 < 6
You now have now a workable entry system. Not only did you construct a robust system, but it also adheres to the KISS principal (Keep It Simple Simon). This system can be cut and pasted into the Explorer within MetaStock. However, the entry is only the beginning of a successful trading system. In later parts of this series, you`ll find the rest of the components that you need to design a profitable trading system.
READ my articles; you'll FIND the most powerful insider trading plans & tips ever put together. Searching for these on your own, is a needle in a haystack (hard to find). I trade everyday & my progressive efforts found the perfect trading card, a set system & plans that really work. These online trading systems are unbelievably powerful, lucrative, reliable, yet simple to use. Until recently, I've kept this formula to myself. NOW, I reveal all.
David Jenyns, leading expert in designing profitable trading systems, MetaStock website offers a huge free collection of trading related tips and tricks. http://www.meta-formula.com/subscribe
(TSR) Trading Guru Reveals Personal Money Management Secrets - Hidden Tactics That Ensure Trading Pr
How personal money management works: In the markets it`s possible to be right, and to still lose money. In fact, it`s pretty common. Traders who win on a high percentage of their trades often end up with their capital eaten away, and nothing to show for their work. They lose their gains because they don`t know how to manage their money.
Being a good manager of your own money is one of the most difficult trading skills to learn. But if you don`t use good personal money management to lock in profits, take small losses on the picks you`re wrong about, and control your use of margin, eventually you`ll lose everything, no matter how good of a trader you are. You need to make protecting your capital your first priority if you want to be successful.
As a trader, your capital is the most valuable thing you have. Without it, you can`t trade at all. For this reason, bringing in no profits on a trade is better than losing any part of your capital. If your account is intact, you can always make a profit another day. If your capital has suffered a loss, you`ll be wasting effort playing catch-up. The more you`ve lost, the longer it will take to get back to where you started from, because you`ve got more to make up for, and because you`ll have a smaller chunk of capital to work with. A smaller capital base means smaller percentage returns on profits. Making 10% on a $10,000 account earns you $1,000, but if you`ve lost half of that account and have only $5,000 left, making 10% on your money will earn you only $500. You`d have to do that twice to make the same $1,000.
Sound personal money management has two main goals: to avoid losing money, and to avoid missing profit opportunities by tying up capital in problem trades for long periods of time. Failing to avoid either of these will cost you. The first goal is straightforward. You want to preserve your capital and whatever profits you`ve accumulated. But you don`t just want to keep your capital, you want to trade with it as well, to continue to grow it and make your returns larger and larger.
Working to avoid losing those profit making opportunities isn`t quite as obvious a goal. With the second goal in mind let`s compare the outcomes of two money-management decisions. Trader A buys a stock, expecting it to go up, and finds that it doesn`t. However, he`s certain it will go up eventually, and he`s incurred a small loss, so he decides to wait it out. He ends up holding the stock for three months before finally selling it. Trader B buys the same stock at the same time as Trader A, but once he sees that it isn`t going up, he sells it at a small loss. He buys another stock and makes a 15% profit on it. His next trade loses 1%, but after that he makes 8 %, 15%, and 30% on a series of trades. Because he is growing his account, he makes these percentages on a larger and larger base of capital each time. At the end of three months, his account has grown by 48%.
Whose personal money management decision turned out to be the best? While Trader B made a nice profit, Trader A not only lost time but also never made his money back. Even if he had made his money back on that stock, it`s hard to see how this was a good use of his capital over the course of three months.
Clearly the goal of not tying up your capital in problem trades has an important impact on your profits. Practising sound personal money management will keep your capital and your profits safe. Though it is a difficult skill to learn, once you know how to practise good personal money management, you can almost guarantee that you will be a success as a trader.
READ my articles; you'll FIND the most powerful insider trading plans & tips ever put together. Searching for these on your own, is a needle in a haystack (hard to find). I trade everyday & my progressive efforts found the perfect trading card, a set system & plans that really work. These online trading systems are unbelievably powerful, lucrative, reliable, yet simple to use. Until recently, I've kept this formula to myself. NOW, I reveal all.
Trading Secrets Revealed is a step-by-step trading roadmap to having excellent money management. http://www.trading-secrets-revealed.com
My FOREX Trading Strategy
Copyright 2006 Timothy Rohrer
I ventured into the FOREX market a little more than 1 year ago. I have tried and tested many different types of trading techniques and styles. Most were failures and some were successful. From my experience, traders making money in FOREX will not reveal their trading system, simply because somebody has to lose money in order for you to make money.
Currently I have two strategies working for me. I started with a demo account a little more than one year ago and used the obvious techniques such as technical analysis and fundamentals. Technical analysis seemed to be the easiest method for an inexperienced trader since it only required looking at charts as opposed to watching the news. I used indicators such as MACD, Fibonacci, and RSI to help assess the market and make a prediction on price movement. Needless to say I was successful in my demo account, however when I went live, fear set in and I could not trade using the same techniques I had developed over 4 months of trading with a demo account.
The stress was too much and like a lot of people, I started looking for a FOREX signals provider to minimize the time spent and stress. After some due diligence on quite a few FOREX signals providers, I did find a reliable FOREX charting software package that provided excellent signals. To my surprise, the signals worked. The only difficult part was to discipline myself to take each signal whether I agreed with it or not. After all, the company I chose had a winning track record for 3 consecutive years.
Now that I had a positive flow of income from a FOREX signals provider, I decided to open a second account using my own trading system. This is where I discovered what I feel is a full proof system when it comes to making a fast 30 to 50 pips in FOREX.
Trading now for a little more than 1 year, I noticed that the market moved on speculation. Speculation based on fear and news events, such as the CPI and retail sales. I noticed that between the times of 4:30 am eastern and 8:30 am there was a lot of critical news in majors such as the Euro and the British Pound. The market would move at the exact moment these major news events were released. If a news event was due out at 4:30 am on the British Pound, more than likely the market spiked at that exact moment 30 to sometimes 50 pips up or down. What I started to do was trade on these news events. I would wait until that exact moment the news was due out and execute a trade when the market moved more than 7 pips from its current price 15 seconds before the news is released. A stop-loss should be set at 10 pips above or below the current price.
The trick to this method is executing the trade at the right time and discipline yourself to keep your stop-loss very tight, setting it to no more than 10 pips after you got into the trade. The reason being, this works all of the time, but if you click too soon or too late you could fail to predict the direction of the market. However, when you are right, your winning trades will outweigh your losing traders significantly since you are looking to make a gain of 30-50 pips and if you a wrong a loss of only 10 pips. I have used this method for 5 months and it works.
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Tim Rohrer is an established FOREX trader. To learn more about reliable FOREX trading techinques and systems, visit http://www.forex-investing.us
