Tuesday, 9 August 2011

Has the Holy Grail Been Sitting Right In Front Of Us?

I've posted about auto and hybrid trading using my algo, Flo but there is another way of using the technology that you may find useful if you want to trade strictly as a discretionary trader. It lets you have the benefits of a computer doing a lot of the hard slog for you, and you don't have to work at 120% efficiency for 8 hours every day.

What I'm talking about is what you have seen in the blog charts over the last couple of days.

A trading picture is a result of several chart components coming together at once. What I have done is put those components into indicators and attached a visual alert, much like the start of a formula one race where the 5 lights come on before the start.

In the chart below, my trade sequence requires a number of things to come together. To go long, I need:
  • two YELLOW dots reasonably close together below the bars
  • the Order Flow indicator to be GREEN
  • the CYAN arrow below the bar to show the thrust after the pullback
The example below shows how this caught the beginning of an awesome move up. ALL of this is computer generated, based on the logic behind the indicator. This is pretty typical of a sequence. This one caught the big up move following the turn on Friday's DowEuroStoxx50. The same sequence can be seen on the ES and most other stock indices. For a discretionary trader to be able to start thinking LONG after the hard down moves of Thursday and Friday does require some screen time. Using the technology to highlight the turn made it much, much easier.

I can watch for the sequence, can add audio alerts too, and have the option of pulling the trigger or not when I see the setup in context. Pretty simple but VERY effective. It provides much more "in your face" trade recognition assistance and takes away most of the analysis paralysis.

I can add the rules to a STRATEGY and back test win rate, profitability and other metrics without having to be a coder. In MarketDelta's RTL or MultiCharts and TradeStation's EasyLanguage, non coders can put together this stuff with relative ease. The learning curve is not steep. I can run the STRATEGY in auto and/or hybrid mode, which is what I prefer. I can also run the strategy to just generate the signal and do the whole trade manually.

What this post is saying is that the use of the technology in trading makes me more profitable, able to work at a lower performance level for longer periods and allows traders with a lot less experience to perform at a much higher level.


  1. That's really cool EL. An on your mark, get set, Go! visual indicator.

    I've been doing similar work in InvestorRT and agree the learning curve on RTL isn't bad.


  2. EL,

    Thanks for the posts. Will you share the order flow indicator that you are using with the community?

  3. This looks very interesting as a means for a directional trend filter. How does it handle prolonged areas of chop? For example, price can bounce around between the EMAs with no clear direction from time to time. Would that be a stand aside signal for Flo with the Order FLow indicator reading neutral? I take it this has been programmed on Multi Charts? Have you tried it on other platforms? Thank you.

  4. Hey EL,

    What do the "yellow dots" measure?



  5. EL,

    Thanks, I also learn a great deal from your posts.

    And I don't think you should feel the need to share the code or underlying details of all of your indicators. This is not open source software development, after all.



  6. EL - thanks for sharing....great stuff. Just started following your work and am a little unclear on what the order flow indicator is...is it volume breakdown? would appreciate if you could clarify how you measure that. Thanks.