Auto Trader Update
It has been a while since I have been able to post to the blog. I originally started trying to write an auto trader update post several months ago. A WordPress plugin had broken the functionality of the blog so that it was impossible to write a post. After many attempts to copy the blog content failed using backup plugins, the back up function from inside WordPress copied my content successfully.
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Just because the blog was not being updated didn’t mean ZoneTraderPro wasn’t working. The Auto Trader was updated to include the Ratio Indicator. The Ratio Indicator is also available for the ZoneTraderPro indicator for all of ZoneTraderPro customers. The indicator works like this. It looks at the market orders being made to move the market. A ratio that is a 1 indicates the buyers and sellers are equal. In the example below, you see a ratio of .9 going into a short exhaustion trade. In this instance the sellers are greater than the buyers, which is exactly what we want to see going into the trade. Then the indicator shows ratios between 3.0 and 1.6 as the selloff begins.
The low ratios for the profit taking pullbacks and the high ratios for the downward legs then continue. The Auto Trader Update which includes the Ratio Indicator will cancel the orders to buy based on the number that set in the parameters. The parameters for the ratio allow you to adjust where the orders get cancelled at. The settings for this chart said it would cancel orders at 2 ticks away from the blue zone, and to look back 5 tick levels to see if the ratio was exceeded. The strategy also allows you to exit a position if the ratio has been exceeded after you have entered a position.
Data Miner Update
The Data Miner was updated to include numbers concerning drawdown. Here is a comparison of 3 Market Replay tests. These tests were for a green days trading long between January 4, 2016 and March 31, 2016. There were 21 trading days that make up these numbers. The parameters for these tests are the same, except that the Ratio Indicator was used in two of the tests. One test used a ratio of 1.4 and the other used 1.5. These tests are run to gather information. You see 4 different contract positions. This is super important. Contract #3 has the worst risk reward, followed by Contract #2, Contract #1, and concluding with Contract #4 which has the best risk reward.
What we see is a pretty decent profit of over $6,000 ($300 a day just trading 2 contracts long) trading without a ratio from trading 2 contracts long, one contract from position 2 and one contract for position 3. But we took 446 trades to get there. However with a ratio of 1.4 we could double our profit per trade. With just 47 trades there was a $1227 profit on just 47 trades from position #1. That profit of $1227 was made on just 10.5% the number of trades. The drawdown for that position and ratio was also the best at $644. By trading the same number of contracts by using leverage at Position #1 we would take our 21 day long only profit from just over $6,000 to over $12,000.
This illustrates the decisions that a user will have to make when setting up a strategy. Do you trade 2 contracts to get to $6000 taking every trade? Or do you filter the trades and increase the leverage to get to that same number? It is also important to remember this is only illustrating trading long on a green day. You will see that different strategies work better trading short and trading on a yellow day.
What is also interesting is some recent tests that showed trading long and short on a red day, was more profitable than the test shown above, without using ratios to filter the trade. Some of this is due to the fact that there has not been severe market turmoil involving Russia and China so far this year. That market turmoil is what leads to illiquidity in the ES. So when the market is opening down in 2016, you do not see liquidity being pulled and the system performs like a yellow day. Contract #2 was winning at 59% with nearly a 2:1 risk reward. As with the above set of test results, these results are from January 4, 2016 and March 31, 2016. There were 23 trading days that make up these numbers. Shown below are two different strategy results trading long when the market opens down. That is why there is a different profit from Contract #2 and #3 even though they took the same number of trades. What was the difference between the two? The stop was 1 tick higher, for the system that performed better.
Currently there are results from over 110 tests. This represents a tremendous database of information for creating a strategy. It takes 1 computer almost 2 days to run one Market Replay simulation to test a strategy. So it represents a large amount of data which is used to create future trading strategies.
Lease the Auto Trader
When you purchase the ZoneTraderPro indicator you receive the Auto Trader for free for one month. Before you start to use the indicator you will work with ZoneTraderPro and create a trading plan. That way when you are ready with a plan, you can start trading your plan in the Sim immediately.
More information about the Auto Trader can be found here. Besides receiving a free month, the price of the Auto Trader has dropped to just $500 a month. As with all updates, there is never charge for the auto trader update, or any update to the ZoneTraderPro indicator, such as the Ratio Indicator.