ZN Bond Trading Using the AutoTrader

ZN Bond Trading Using the AutoTrader

“The ZN system is firing on all cylinders today.” Sean H.

Sean couldn’t have said it better.  The profit from the 5 days of trading just the ZN Counter trend trade pattern was $2171 from two contracts.  That was one contract at -1 adverse excursion and 1 contract at 0 adverse excursion.

We are going to take a look over the last week of trades from the AutoTrader Strategy and also the trend trades that occurred. The logic for trend trades has not been added, so it is being done manually right now.  Beta testing is going to start next week of the strategy.  More on that at the end of the post.

Quick Lesson

What is a trend and counter trend trade?  These two patterns form the basis of the ZoneTraderPro theory.  As price reacts between the zones of support and resistance we form patterns.  The simplest of the patterns is the counter trend trade, because we are just trading at the light blue support or resistance zone.  The trend trade pattern occurs when we have a retracement to intermediate support or resistance.  In this picture we have a long counter trend trade and a short trend trade.

Statistics
How statistics are figured

A reversal pattern forms when we have adverse excursion of a trend trade.  Here is a perfect reversal in the ES from yesterday.

ES Reversal 50115
ES Reversal 50115

Friday 4/24/15

Friday saw 7 counter trend wins totaling 29 ticks taken by the auto trader, 3 trend trade wins totaling 35 ticks, and two trend trade losses for 8 ticks.  Unfortunately the 11 tick trend trade win likely would not have been filled, since there was not enough contracts to fill and exit the short trade before it.

Friday 42415 Chart 1
Friday 42415 Chart 1

The only real trading commentary concerns the short counter trend trade which only nets two ticks.  There were not enough contracts to fill the target and we bounced and re-tested the high.  At this point I clicked the adjust target button on the chart and the new target adjusted to where the new intermediate zone would print.  Why would you do this in real time?  The last thing you want is to be stuck in the short trade in an up trending market is the first answer.  Second if you are stuck in that first trade, then you cannot enter the 5 tick winner at 0938 hours.  Another way to handle this would have been to use the auto breakeven feature which would also have gotten you out of the trade with a small 1 tick win.  Either way, you are out of a trade that didn’t go as expected.

What are all those lines on the charts?

A major advantage that ZoneTraderPro offers is the ability to get our order in as soon as possible, both in and out. So where the pink lines draw, that is where our order was first placed. In the picture below, you see them cancelling and replacing as the numbers change. The dark blue line represents where your target is currently at for that bar.  If you have set a parameter which causes your target to move, then the blue line redraws on that bar.  Once you are in a trade the logic will allow you to set a parameter that will move the target to exactly the intermediate zone.  There are also buttons on the top of the chart that will allow the target to be reset to a minor zone and a button to reset it to a intermediate zone, without having to disable the strategy.

Friday 52415 Chart 2
Friday 52415 Chart 2

In the late morning we saw a long trend trade take us down into a counter trend long trade, which ended up being a wash.  Then in the afternoon, we entered a short trend trade that went against us all afternoon until the close mercifully ended the position. But an excellent trading day, with only 1 real difficult decision.

The P&L from the simulator was $750 and that was only trading the counter trend trades.

Friday Profit
Friday Profit

Monday 4/27/15

On Monday we had just 4 counter trend trades, 3 wins for 13 ticks and 1 end of day loss for a 1 tick.  There were 2 trend trade wins for 15 ticks and one trend trade loss for 4 ticks.

Monday 52715 Chart
Monday 52715 Chart

And the P&L from the simulator for the counter trend trades.

Monday Profit and Loss
Monday Profit and Loss

Tuesday 4/28/15

On Tuesday there were 4 counter trend winning trades totaling 18 ticks, two trades that were exited at breakeven, one loss, and one trade that would have won but we didn’t get a fill.  There were 4 trend trade wins worth 30 ticks and no losses.

Tuesday 52815 Chart 1
Tuesday 52815 Chart 1

 

Tuesday 42815 Chart 2
Tuesday 42815 Chart 2

And the P&L from the simulator for the counter trend trades.

Tuesday Profit
Tuesday Profit

Wednesday 4/29/15

If you traded on Wednesday after the big GDP number miss and then into the Fed Meeting announcement you have more guts and money than I do.  A system like this does not like news, especially about interest rates, because it is the news moving the charts, and not the trading algorithms.  Good day for the beach.  Commentary is useless because the only thing that you would have learned is that you lost money on a day where there was multiple major news events.

Thursday 4/30/15

I included the chart of the overnight session, because you see the same patterns in that session.  Why?  The liquidity for the overnight session is usually 3-4 times what the liquidity is for the ES during the day.  That makes for stable patterns.  What happens if there is news?  There is logic built in to disable trading and exit a position if the liquidity falls below a number that you preset.

Following the big news day, there was a lot of volatility,  There were 9 winning counter trend trades worth 41 ticks, 4 counter trend trades that broke even, and two losses for 14 ticks.  There were 3 trend trade wins for 26 ticks, and 1 trend trade loss.

Thursday 53015 Chart 1
Thursday 53015 Chart 1

 

Thursday 43015 Chart 2
Thursday 43015 Chart 2
Thursday 43015 Chart 3
Thursday 43015 Chart 3
Thursday 43015 Chart 4
Thursday 43015 Chart 4

Reversal Trade

On the chart above you also see a trend trade that is neither a win or a loss.  The reason is that I do not have a clear trading plan yet for the trend trade, and I do not know if I want to be stopped out, or just exit at breakeven.  This forms the basis for a perfect reversal short trade at 1046 hours.

Thursday 53015 Chart 4
Thursday 53015 Chart 4

And the counter trend trade profit.

Thursday Profit
Thursday Profit

Friday 5/01/15

Friday saw a much quieter day with only 4 counter trend wins for 18 ticks.  The loss was not counted as it was at a major news release.  There were two trend trade wins for 10 ticks and two trend trades, that cannot be properly judged to be wins or losses.  After 12 noon, there was a successful reversal trading pattern.

Friday 50115 Chart1
Friday 50115 Chart1
 Again there is reversal trade from the trend trade that had adverse excursion.
Friday 50115 Chart 2
Friday 50115 Chart 2

 

Friday 50115 Profit
Friday 50115 Profit

AutoTrader Beta Testers Needed

Sometime next week I expect to have the beta available for release to customers who are interested in using the software.  In order to be a beta tester you must have purchased the ZoneTraderPro software, sign a release, and place a non-refundable deposit of $1000 for the 1st month.  That will give you free use of the software until no bugs are being reported and the software appears stable.  Expect that to last at least 30 days.  After that the deposit will be your first 30 days for the lease of the software and you will not be re-billed.  You will be given a Paypal link to sign up for a recurring monthly lease payment.

The software will also work for the Tick Divergence trade and I will be making a similar post with results next week.  The results I have seen with Tick Divergence, are similar to the ZN.  There are more trades, both wins and losses.  The Tick Divergence logic was added this week.  I currently have 1 issue (a bug) that is being worked on.  When that is fixed, the ZN trend trade will be added.  It will actually be added as a completely separate strategy, so as to stop adding complexity to the counter trend strategy and actually give more control over the trend strategy.

Limited number of ZN/ES Licenses for the AutoTrader

These first customers are all guaranteed AutoTrader licenses that will trade both the ZN and ES, or anything else that has proper liquidity and patterns (think German Bonds).  However there will only a total of 10 licenses available.  There will be a different strategy that will only be able to trade the ES Tick Divergence using AutoTrader.

What should you be doing now?

Without a doubt you should be making a trading plan based on statistics.  Call me and I will help you with that.  The next post will deal with all of the options and will feature a downloadable manual for the strategy.  But if you do not start this process now, you are wasting valuable time to play with the strategy for free.  Additionally this is not Tradestation.  It would be a mistake to assume that you can set the defaults, run it, make changes and optimize.

Lastly you should be using NinjaTrader to download and save market replay data.  Downloading the ES and ZN from the Download Market Replay function will only go back so many days.  But I have seen that there is a small difference between the actual values of the $TICK on the live chart and what Download Market Replay gives you.  I would guess this is because there are different servers and one server recorded it one way and the live server you were on gave you a different number.  So you should have the Market Replay recorder running from 930 to 1600 to get this data and know that it is right.  When the NYSE is closed, download the ZN and ES data so that you have the full day of data.  Do not overwrite the $TICK.

The full risk disclosure can be found here.