AutoTrader Performance Guarantee

AutoTrader Performance Guarantee

ZoneTraderPro is introducing a AutoTrader performance guarantee for its customers using the AutoTrader. The AutoTrader performance guarantee is not a guarantee that you will make money trading in a live market because that is beyond the control of ZoneTraderPro.  The AutoTrader performance guarantee says that using a defined set of parameters using 2 contracts on the ES market, the ZoneTraderPro AutoTrader will generate $3000 in profits after commissions using the NinjaTrader Market Replay.

ZoneTraderPro will publish the parameters used for a Green day and a Yellow day. The system will not trade on a Red day.  At the end of the month if those parameters do not produce $2000 in profits after commissions (using $3.40 as the rate) the next month is FREE.  If the system produces between $2000 and $3000, $100 will be deducted for every $200 below $3000.  For example, if the system produced a $2650 profit, then $200 would be deducted from the following months lease.

Why ZoneTraderPro doing this? There are 2 reasons.  The 1st reason is that ZoneTraderPro believes in its system.  The 2nd reason is because if market conditions cause the system to be unprofitable, ZoneTraderPro does not want to force its customers to trade in bad market conditions.  For example, during the early summer months of 2015 the market became extremely volatile due to the conditions in Greece, Russia, and China.  Because of these external news events there were a disproportionate number of red trading days during this period.  We also took losses on green and yellow trading days when news events occurred while trading.  The overnight ranges and the gaps foretold extremely volatile trading days.  ZoneTraderPro does not want its customers to make a bad decision and trade on these risky days and risk blowing up an account.

Now look at October 2015. With all of the problems of China and Greece in the rearview mirror, the market returned to normal trading as evidenced by the fall in the VIX.  The profit for ZoneTraderPro system number 27 using just 2 contracts was $11,901 for the month of October 2015.  This systems cumulative total for the year of 2015 is $47,785 after commissions.  However in May 2015 system 27 only produced a profit of $1,360 after commissions.  These cumulative numbers reflect trading all days regardless of color.  That is an average of over $4,700 per month with no optimization or bias to the type of trading day.  Trading on red days accounted for only a $1,646 profit of the $47,785 total.  There have been 52 red trading days so far in 2015. That is only $31 a day profit trading on a red day.  You would probably have better luck betting fantasy football, if they didn’t allegedly have people that used insider information to cheat.

So how would the AutoTrader performance guarantee have done in 2015?

These results are based on trading from 0945 to 1600 hours (un-optimized) and have no stop loss parameter working.  Only the 2pm Fed days trades are removed.

Monthly System Totals
Monthly System Totals
Monthly System Totals
Monthly System Totals

These results are not optimized in any way and the parameters do not represent a trading plan. Why is this not a trading plan?  The ZoneTraderPro AutoTrader has the option to timeout and not take trades 3 times during the day.  The testing has shown that there are significant drawdowns over a consistent timeframes during the day.  An optimized system would likely not trade during these known periods.  An example of this using system 27 shows that trades taken after 1535 hours EST lost $3578 during the year.

Trade Entry Times Test 27
Trade Entry Times Test 27

The 2nd reason that this is not a trading plan is because of the odds involved on green and yellow days.  On a Green day long trades are favored and on a Yellow day short trades are favored.  It would be illogical to trade the same number of contracts short on a Green day as you would trade long, and vice a versa for a Yellow day.  Below are the year to date profit results for test 27 showing a 2:1 profit advantage for trading long on a green day.  the last consideration is that there have been 70 green day and 82 yellow days.  On 12 fewer trading days the green days have made $4744 more in total profit.

Profit Totals Test 27 Green Day
Profit Totals Test 27 Green Day

Here are the profit totals for the same test on a yellow day.  We again see the same 2:1 ratio, except it is reversed in favor of the short trade.

Profit Total Test 27 Yellow Day
Profit Total Test 27 Yellow Day

The last reason this is not a trading plan is based on the above picture.  On a yellow day, trading long and short, you make over $1000 more trading from the -1 position (Postn2 on the worksheet).

The ZoneTraderPro AutoTrader Performance Guarantee rules

  1. ZoneTraderPro will publish in the blog what systems are used on a green and yellow day.
  2. There is no trading on a red day.
  3. The start and stop times for each system will be published.
  4. There are no trading timeouts.
  5. Any trades after 2 p.m. on a Federal Reserve announcement day will be disregarded.
  6. 2 contracts will be traded long and 2 contracts will be traded short each trading day.
  7. The contracts are traded from the -2 and -1 positions.
  8. A commission rate of $3.40 per round trip will be used.
  9. A $700 stop loss on each side of the trade is active.
  10. The illiquidity filter is active and set at 900.
  11. The NinjaTrader Sim Stop is active and set at 150.
  12. ZoneTraderPro will make available a trade list and trade results to all of its AutoTrader customers on a monthly basis.
  13. If the system results are less than 2000 in profit the following month is free.
  14. If the system results are between 2000-2199 there is a 500 discount the following month.
  15. If the system results are between 2200-2399 there is a 400 discount the following month.
  16. If the system results are between 2400-2599 there is a 300 discount the following month.
  17. If the system results are between 2600-2799 there is a 200 discount the following month.
  18. If the system results are between 2800-2999 there is a 100 discount the following month.
  19. There are no guarantees that using this system in a live market will generate a profit.

ZoneTraderPro reserves the right to change a trading system or parameters as new features are introduced into the AutoTrader. Any changes made will apply to the guarantee the following month and not retroactively for a current month.  For example, in the previous ZoneTraderPro blog post I talked about a new feature involving the order flow ratios being developed for the AutoTrader.  This feature could significantly change the winning percentage of the systems and would be utilized after it has been tested and when it becomes available to ZoneTraderPro AutoTrader customers.

Remember ZoneTraderPro offers a free month of the AutoTrader to all of its new customers. The AutoTrader performance guarantee even applies if you are on your free month and a new customer.  ZoneTraderPro customers also have access to all of the trading parameter tests.

Starting systems and parameters

For a Green day ZoneTraderPro AutoTrader performance guarantee will use system number 30 to trade long and system number 27 to trade short. System number 27 will start trading at 0950 hours and end at 1535 hours.  System number 30 will start trading at 0945 hours and end at 1535 hours.

For a Yellow day ZoneTraderPro AutoTrader performance guarantee will use system number 27 to trade long and system number 27 to trade short. System number short 27 will start trading at 0945 hours and end at 1535 hours.  System number 27 long will begin trading at 0945 hours and end at 1535 hours.  Below is a picture of the individual test parameters that will be utilized.

Test and Trading Parameters for the AutoTrader Performance Guarantee
Test and Trading Parameters for the AutoTrader Performance Guarantee

The AutoTrader performance guarantee is not a guarantee or representation that these systems will make money trading in a live market. The AutoTrader performance guarantee and the testing results talked about in this blog entry are hypothetical because they are tested in Market Replay. You should be aware of the hypothetical trading disclaimer found here.

AutoTrader Data Mining

AutoTrader Data Mining

One of the biggest advantages of the ZoneTraderPro AutoTrader has to been to learn about ZoneTraderPro and to be able to take what has been learned and create a workable trading plan to take advantage of statistical patterns. ZoneTraderPro was created 9 years ago to identify repeating patterns in the ES market.  I spent hours each day identifying and classifying each trend and counter trend trade, and then posting those results to the website.  Again in 2010 I did the same type of study when working out a basic trading plan.  Unfortunately the AutoTrader Data Mining project had not been created.

But the biggest advance in knowledge came when a ZoneTraderPro user (Thanks Greg) wanted to look at the use of the theory and use the value area of the market profile. That created the concept of a green, yellow, and red day.  A green day is when the market opens above the previous days value area, a yellow occurs when it opens in the value area, and a red day occurs when it opens below value area.  When the test results using NinjaTrader Market Replay were data mined, it showed that long trades were almost 2.5 times as profitable on a green day and short trades had a similar 2.5 times figure on yellow days.  Trading on a red day, while profitable, has a very small profit factor, and there are no statistical advantages.

What did it take to get there? The ZoneTraderPro AutoTrader has the ability to completely control the trades it takes.  The AutoTrader has the following features;

  1. Set the stop and profit target.
  2. Allows multiple locations for trade entry.
  3. Ability to trade short only, long only, or both trading directions.
  4. Dynamically adjust the target based on the where the intermediate zone will print.
  5. Move stop to breakeven or other defined location when you have favorable excursion.
  6. Move target in case of adverse excursion to exit the trade.
  7. Manual target controls on the chart.
  8. NinjaTrader Simulated Stop.
  9. Three time out periods.
  10. An illiquidity filter which detects illiquidity, stops trading orders and text messages the user.
  11. A stop trading feature if losses exceed your parameter. This has a long and short loss parameter.
  12. Detect Tick Divergence ES trades. Parameters also allow moving a stop or exiting a position if trade becomes non-divergent after entry.

With such a robust feature set, it has taken months to test the parameters to figure out what works and what doesn’t. And that was months using multiple computers.  It takes a day and half to test 15 months of data and do 1 test run.  All of this data is available to ZoneTraderPro customers to use to create their AutoTrader trading plan.

What can you expect from the AutoTrader Data Mining program?

The single most important thing that ZoneTraderPro offers its customers is the ability to data mine this information to determine what works and what does not. ZoneTraderPro has the ability to data mine and analyze thousands of trades to determine the best times to trade and the best days to trade.

Here’s a look at the product that is produced.

We have the ability to trade from 4 different positions and analyze each of those different positions. For each position we look at cumulative profit trade count winning percentage dollars per trade the long and short trade counts the long and short winning percentages and the long and short dollars per trade.

Here we analyze trading two contracts for the month of October 2015.  This is a system that does well short with $3894 in profit versus only $1328 in profit for the long trades. All values take into account commissions ($3.40 RT).  What is also interesting is the $5223 cumulative profit does not take into account whether the type of day was green, red, or yellow.  This particular test reflects a future enhancement to the system.  The winning % is not a very important figure because in the case of a breakeven trade, it classifies that as a loss because of the $3.40 commission.

Next we can see a monthly profit and a cumulative monthly profit for one the trading systems and how it has done in 2015.  There has been no time optimization.  There has also been nothing done to force a fill which is a NinjaTrader setting.  This setting will fill a target and stop if only one contract had traded.  In case you are wondering where are the red days, out of 52 days the total profit was $1264.  This system did over a $10,000 profit in October 2015.

Monthly Totals for 2015
Monthly Totals for 2015

Here is the equity curve for the green days.

Equity Curve for Green Days
Equity Curve for Green Days

Here is the equity curve for the yellow days.

Equity Curve for Yellow Days
Equity Curve for Yellow Days

Next we can see trade entry times 1st broken down into 30 minute time frames.  But should you trade based on a half hour analysis?  Probably not because we have 5 minute data.

 The Auto Trader Data Mining then breaks it down into 5 minute time frames.  The information includes the profit or loss, the dollars per trade the trade count and we can see this as a cumulative total and a long and short total.  The column names are the same as the picture above.  This picture is from green days which favors long trades.

5 Minute Time Frames
5 Minute Time Frames for Long Trades

It is extremely important to note that in the testing it has shown to be more profitable to use a specific set of parameters to go long and a different set of parameters to go short.  Taking this one step further, testing is also shown that you use different parameters depending on the type of day based upon the value area.

Here is the 5 minute picture from a yellow day, which favors short trades.

5 Minute Time Frames for Short Trades
5 Minute Time Frames for Short Trades

The next set of data has broken down the data based upon the day of the week, the color of the day, and the time.

Data Based on Day and Time
Data Based on Day and Time

Alongside of each trade we can also see the day’s cumulative profit and loss broken down by long and short trades.

Here is a look at the intraday profit and loss numbers.  The 1st column is what the final profit ended up as.  The next column is the maximum intraday profit and then the maximum intraday loss.  Remember these numbers are based on 2 contracts.

Intraday Max Profit and Max Loss
Intraday Max Profit and Max Loss

How powerful is the Auto Trader?

Here is that worksheet sorted based on what the maximum intraday long loss was.  This is the last column.  There are 70 trading days. 33 days had no intraday loss from long trades and another 16 had no more than 1 losing trade.  This is the last column on the right.

Days With Small or No Loss Long Trades
Days With Small or No Loss Long Trades

What does the bad days look like?  Since we are trading 2 contracts, a setting of 4 points (where the $407 is boxed) would have happened 6 out 70 times.  But here is why this is probably the hardest decision you will make.  Look at the column next to the colored percentage column.  (That is the column with -257.9 at the top.)  With the exception of the worst day (1/09/15) all of the other days saw a significant turnaround.  The day with a $407 loss turned into a $436 profit.

Days With Larger Loss Long Trades
Days With Larger Loss Long Trades

Here is what the short trades look like on a yellow day when they are favored.  A yellow day is more volatile than a green day, but there was still 23 days that had no intraday loss from short trades. Another 26 days had less than a two point loss per contract. Look at the column “Final S Intra Day Prof” for the end of day profit total.

Days With Small or No Loss Short Trades
Days With Small or No Loss Short Trades

This is extremely helpful for determining a stop trading strategy for a losing day.  The software has separate parameters for long and short stop loss values.  This is because the testing has shown that while one side of the trade may be losing, the other side is doing quite well so it is illogical to shut down the entire strategy unless duty illiquidity and volatility both sides of the trade are consistently losing.

The next thing that is looked at is a day by day recap which includes the values for the overnight gap, the overnight range, the overnight volume, the opening 15 minute range and candle body, the opening 30 minute range and candle body, the type of day, the statistics for the long trades that day, the statistics for the short trades that day, and the maximum intraday profit and the maximum intraday loss for each side of the trade.  Here we can see its not going to be an easy day with a large negative gap and overnight range.

Gap and Range Data
Gap and Range Data

We can then look at some different statistics concerning the overnight gap, the overnight range, the opening 15 minute bar and the opening 30 minute bar. A list of the historical dates with the matching data is then provided so that the user can quickly compare the current historical overnight chart for clues to the type of day and volatility that lay ahead.

Gap and Range and 15 Minute Candle Bar Data
Gap and Range and 15 Minute Candle Bar Data

What is next?

There are two improvements being made to the software.  The first involves the Point of Control, which is another Market Profile indicator.  Trades are excluded if they are significantly below the POC.  The other advantage is that there are significantly fewer trades.  This system did $5223 profit in 23 days.

Point of Control Statistics from the AutoTrader Data Mining
Point of Control Statistics from the AutoTrader Data Mining

The second improvement that shows a bigger promise to reduce losing trades is using order flow.  The idea is to monitor the order flow for momentum and cancel trades when the bid/ask ratios are unfavorable.

In this losing short trade we see where we lost a short trade.  Where you see the 389 on the ask is the entry point of the trade.  The price ladder below the entry shows order flow colored in green and blue.  That means the ratio of buyers to sellers on market orders was at least 2:1 or greater.

Ratios from a Short Losing Trade
Ratios from a Short Losing Trade

Similar on a losing long except the market orders selling on the bid are in red.

Ratios from a Long Losing Trade
Ratios from a Long Losing Trade

Here is what we want to see, equal number od buyers and sellers with no advantage.  Here is the ZoneTraderPro chart with two winning short trades.

Winning ZoneTraderPro Trades
Winning ZoneTraderPro Trades

And what those two trades looked like showing order flow.  There is very little green and OFA showed the volume clusters in red as being bearish.

Winning ZoneTraderPro Trades from the OFA Chart
Winning ZoneTraderPro Trades from the OFA Chart

The order flow charts are from Order Flow Analytics and are not part of the ZoneTraderPro software.  The ZoneTraderPro software will determine and print the ratio on the chart and shut down the pending orders if it is too high.

Because these results are based on the NinjaTrader Market Replay, you should understand the hypothetical performance disclaimer.