NASDAQ 100 long term candlestick scan

A short update on my long term candlestick scan.

It candlestick scan scans the Nasdaq 100 stocks for long term bullish or bearish reversal patterns. The basic idea is to search for Hammer or hanging man candlestick patterns, but not only on a daily chart, but on any compression, from daily to yearly compression (Yes, that’s one year of data per candle, the resulting reversal pattern would be valid for at least 3 years)

But see for yourself which Nasdaq stocks seem to change the direction according to the long term candlestick scan. The list gives you the duration of the reversal formation (expect about the same time to either reach the target or get stopped out)

Bullish on the left side, bearish on the right side.

Position sizing – the easy way to great performance

Working on your position sizing algorithm is an easy way to pimp an existing trading strategy. Today we have a look at an energy trading strategy and how the position sizing can influence the performance of the strategy.

The screenshot shows you the returns of the same trading strategy, trading the same markets, the same time frames and using the same parameters. The returns on the left side look nice, making money every year. The returns on the right side are somehow shaky, and you would have to love volatility of returns if you would think about trading this basket. The only difference between the basket on the right and on the left side is the position sizing.

The energy basket:

The basket trades German power, base and peak (yearly, quarterly, monthly), coal, gas, emissions. All instruments are traded on a daily and weekly time frame chart, using the same parameters. If the daily trading uses a 10-period parameter, the weekly trading would use a 10-week parameter. This limits the degrees of freedom I have when doing the strategy-time frame-parameter merge, thus minimizing the curve fitting trap.

The strategy:

The strategy which generates the buy and sell signals is quite simple, a classic trend following strategy described in my book and similar to the bitcoin trading strategy described within this blog. Go with the trend, buy the high, short the low. Not rocket science but a solid trend following approach.

The position sizing:

The basket on the right shows you the performance of the strategy when you would invest the same amount of money in every trade. This usually is a nice approach when trading stocks which have a somehow similar volatility, but it seems to cause problems when trading commodities. Emissions have a higher volatility than API2…

The basket on the right will not invest the same amount of money in every trade, it will risk the same amount of money with every trade. This basically eliminates the influence of volatility, as commodities with high volatility just will invest less. At this stage it is important NOT to use value at risk or any other time-series based risk measurement. You will have to calculate the actual risk for the trade, meaning the difference between the entry point and the nearest exit point. If you just use VAR, which basically is just a deviation of a standard deviation calculation, the risk information will always be not up to date and brng you all the problems which delayed information causes in trading.

Conclusion:

Don`t try to find the perfect entry and exit points, work on your risk and how you weight the different markets. As long as you are long when the market goes up and do not invest all you got in one trade, you should survive. If you use a wise combination of strategy – position sizing and market selection, the gods will sprinkle gold on your path.

Sutton’s law: Go where the money is

There is an apocryphal story about the famous american bank robber and jail breaker William Sutton being asked why he why he was robbing banks. His genius answer was „That`s where the money is“.

There is a second famous quote of William Sutton, asked why he used a machine gun for robbing a bank: „You can’t rob a bank on charm and personality,“ Both quotes come up to my mind when I am asked about the key things in trading.

Sutton’s law #1: Go where the money is

I am a trend follower, just because it is easier to do than picking tops or bottoms. Robbing a bank might not be a good idea, but going where the big money is, certainly is. Big money is invested over a long time, markets are just not liquid enough so that pension funds and other big players could switch their position every day, so once a trend, or call it bullish market environment, is established, chances are great that people come in, stay in and fuel the further movements. It becomes a self fulfilling prophecy. That`s where the money is, that`s where I can do my day-to-day small scale market robbery.

Sutton’s law #2: You can’t rob a bank on charm and personality

Sutton’s law #2 is my reason for being an algorithmic traders. The market basically is a fight of everybody against everybody, all weapons and tricks allowed (well, there have been some regulations introduced..) It would be suicide to risk your money on just your charm or personal beliefs. If there is big data available, use it. If you got an algorithmic trading software available, use it. If you lose, don`t blame the market, blame yourself for not being prepared.

Trading the markets and robbing a bank has always been a tricky business, but using the right approach, using the right means and methods, both things can be profitable.

But before you fear about my professional future, I will stay with trading and rob my counterparts at the market. I got great software which gives me some aces up the sleeve, so no need for machine guns.

William Sutton always denied to have created Sutton’s law, he blamed a journalist who needed to fill his pages. The real answer of Sutton on why he robbed banks was: „Because I enjoyed it. I loved it. I was more alive when I was inside a bank, robbing it, than at any other time in my life. I enjoyed everything about it so much that one or two weeks later I’d be out looking for the next job. But to me the money was the chips, that’s all“.  Shouldn’t this be right the motivation of all men dedicated to their job?

Willie Sutton, R.I.P.

 

 

Monthly Seasonal Performance of Stocks

Seasonality changes over time!

First have a look at a screenshot of one of my favorite website investopedia.com They have some nice articles about the seasonal performance of stocks and the effects in trading. But unfortunately the information is not precise, and therefore misleading.

The chart shown suggests that the average return for the S&P500 (index or stocks?) has been positive, except for September. Further down they speak about the January effect, suggesting an average positive performance of stocks in January.

When I did my own tests, using data since 2000, the results looked a little bit different:

I did not run a test on all S&P500 stocks, but I ran a backtest on the DOW 30 and the German DAX 30 stocks. As you can see on the screenshot, the average performance in Dow stocks in January is mostly negative. The German stocks show a mixed behavior in January.  The monthly seasonal performance of the Dow Index is also quite mixed. And this beside markets noting above their levels of 2000. If there would be no January effect, than I would have expected an average bullish January performance, as the market since 2000 is up.

But there are also good news. Have a look at the performance of the last three weeks of the year. Nearly everything is positive.

Conclusion: Seasonal effects exists, but it is most probably completely useless to use data from 1926 up to now, as the investopedia article did. Better take just the last 10-20 years, try to get rid of an overall bias by selecting a test window that starts and ends at about the same level and then make some money on your own thoughts.

Stay careful and test before you trade!

more: http://www.quanttrader.com/index.php/saisonale-muster-backtest/KahlerPhilipp2015

 

 

 

EEX Phelix Base Yearly – Buy Wednesday, short Thursday?

When it comes to simple trading strategies, the day of the week is surely one of the best things to start with. That’s nothing new when it comes to equity markets. Everybody knows about the calendar effects, based on when the big funds get and invest their money. I do not know about any fundamental reason for the day-of-week effect in German power trading, but is seems to be a fruitful approach.

First of all I have to point out that it is not only the day of the week which is important. A strategy that just buys on Wednesdays and sells 1 or 2 days later would be doomed. But if you add a little filter which confirms the original idea, you will end up with a profitable trading strategy.

This filter will just be a confirmation of the expected move: If you suspect that Wednesday ignites a bullish movement, then wait until Thursday and only buy if the market exceeds Wednesdays high. Same for the short side, wait for a new low before you enter!

Have a look at the chart. The strategy shown buys on Thursdays if Wednesdays high is exceeded. The position is closed 2 days after the entry.

If you run a simple test which day of the week is the best to get ready for a long trade the day after then the next chart shows the return on account of the strategy using data from 2012 up to now: (exit one day after entry)

The winner is: Tuesday!

Conclusion: To buy  EEX Phelix Base Yearly on Wednesday as soon as Tuesdays high is exceeded seems to be good idea. And you should be very careful if Fridays high is exceeded on Monday.

Contact me for codes, keep testing and don`t forget your stops!

Bitcoin – end of the bullish bubble

Bitcoin has come a long way, and now it is time to say good bye.

Being a trend following trader on the long side, the chart right now suggest anything else but a trend following long strategy. It might all look completely different in a few weeks or months, but right now the bitcoin market is done. The ichimoku scanner indicator still shows 100% bullish, but have a look at the history and the formed indicator-market patterns:  As marked on the chart we can see a nice bearish divergence. This is not a long entry signal!

 

Lower highs, lower lows; goodbye bitcoin, loved to trade you, but with a bearish behavior like now you are not my friend any more.

 

Ichimoku scanner indicator: (password: code) http://www.quanttrader.com/index.php/ichimoku-scanner/KahlerPhilipp2015

Bitcoin Trading Strategy – review of returns

Bitcoin is not as bullish as it used to be. May it be due to fundamental reasons like transaction cost and slow speed, or maybe the herd found a new playground, whatever it might be, it is a good time to have a look how my bitcoin trading strategy performed.

The bitcoin trading strategy uses two moving averages for the trend detection, and, when the averages say bullish, the strategy will buy if the market moves above it`s old swing high.

The position is protected with an exit at the last swing low and a 3% trailing stop.

But have a look how this simple strategy performed over the last two years:

Trading on a daily timeframe and investing 10000€ with each entry, the strategy managed to get more than a 100% return over the last 2 years.

You might say this is just due to the curve-fitted moving averages (calculated over 54 and 21 bars), but if you have a look at other timeframes, using the same parameters, you will see that trendfollowing has been a very stable approach.

The chart shows the returns (green lines) of the strategy running on an 4h, 8h, 12h and daily timeframe. All timeframes basically give the same return, which is a nice sign of strategy stability.

Here comes a look at some nice entries: See how the strategy waits for a new high and then protects the position with a trailing stop (green dots)

The bubble might be over for now, but make sure to go long if bitcoin makes a new high!

see also: http://www.quanttrader.com/index.php/bitcoin-handelsstrategie/KahlerPhilipp2015

The rhythm of the market

Usually we chart the market at it’s absolute level. But what, if we would just chart the net daily, weekly, monthly movement? Would this be an advantage? Would this show us new trading opportunities?

The short answer is: Yes! The trend is not everything, and it seems to be of some significance for further movements, if the market has moved more than x % from the beginning of the day, week or month.

But let’s have a look at some charts – and you will see how well it works:

The first chat is an intraday chart of EuroDollar, 8am-5pm CET. It shows you the daily net movement.

If (at the end of the chart) the indicator says +0.01, it means, that EUR is 0.01 above it’s 8am quote. The band around the daily movements is just a 2 standard deviation band.

 

Trading Idea: Buy if the indicator crosses the upper band, short if the indicator crosses below the lower band. Exit at the end of the day.

 

This is a profitable approach, as you can see on this screenshot of a commodity portfolio trading according to this methodology.

 

And if it works on an intraday timeframe, also have a look at the higher timeframes. The next chart shows you the weekly and monthly movements, but now it is up to you to com up with an appropriate trading idea.

see also: http://www.quanttrader.com/index.php/intraday-vola-ausbrueche/KahlerPhilipp2015 (in German)

codes for indicators (passwort: code) http://www.quanttrader.com/index.php/equilla-codes-rhythm-of-the-market

STA – Society of Technical Analysts

I am happy to announce that Trevor Neil will be presenting my „VIX Timing for SP500“ at the next STA meeting in London.

Meetings & Events

I wrote the strategy for the IFTA conference in Tokyo and published it on this site It performed well, and now it is on Trevor to use it for educational purposes and spread the word about the advantages of algorithmic trading.

„Trevor Neil will present the VIX Prop Trading Method. This method uses spikes in the VIX to generate buys in the S&P. While this is a known trading method, but the practical problem is defining the VIX spike itself. Trevor uses two timeframe Bollinger Bands and a reversal trigger. It is a system and has a trailing exit. The full system testing results will be shown. The method was created using modern development and testing software. This method with these parameters was first shown at the 2015 IFTA conference. We can see the results at the time. We can now do a true walk forward test and study the performance since then and determine if it is genuinely a robust method. All rules and code will be made available to those interested.

SPEAKER

TREVOR NEIL, BETA

Trevor Neil has been a trader for over 40 years and technical analyst for more than 30. He is a past board member of the STA and runs BETA Group, which gives market timing skill seminars to institutions internationally.“

Trevor, I wish you all the best for you speech!

 

 

 

Swing Trading Indikator

Lokale Hoch- und Tiefpunkte sind die Basis aller technischer Analyse Methoden. Durch die Abfolge dieser Punkte und deren Lage zueinander wird sowohl ein Trend als auch eine Seitwärtsphase definiert. Einzig die Bestimmung der Lokalen Hoch- und Tiefpunkte macht Probleme.

Lokale Hochs und Tiefs am Chart

Um die Umkehrpunkte am Chart zu bestimmen können Sie z.B. den Zig-Zag Indikator einsetzten. Er ist in jeder besseren Chartsoftware enthalten.  Auch könnten Sie die hier bereits mehrfach erwähnte Swing Punkt Definition verwenden.

Beide Vorgehensweisen haben jedoch auch Nachteile: Der Zig-Zag Indikator verfügt eine fixe % Einstellung für die Marktvolatilität. Deshalb muss der Indikator für jeden Markt und jede Zeitebene extra angepasst werden. Die Swing Punkt Definition verwendet zwar keine Parameter, dadurch dass sich das Swing Muster jedoch nur über 3 Bars erstreckt, eignet sich dieses Kursmuster eher zur Definition von sehr kurzfristigen Hoch- und Tiefpunkten.

Swing Punkte – auto adjust

Um den angesprochenen Schwachstellen vorhandener Indikatoren abzuhelfen habe ich einen Indikator entwickelt, der diese Schwachstellen beseitigt. Er passt sich automatisch an die Marktvolatilität an. So wird es möglich den Indikator in verschiedenen Märkten und Zeitebenen ohne Anpassungen zu verwenden.

Euro Swing Punkte

Der Chart zeigt die wesentlichen Hoch- und Tiefpunkte auf einem EURUSD Tageschart.

Wechselt man nun einfach die Periode des Charts, und damit auch die Volatilität pro Bar, dann ändern sich natürlich auch die Swing Punkte. Allerdings werden auch in dieser anderen Zeitebene weder zu viele noch zu wenige Swing Punkte angezeigt.

Hat man diese Swing Punkte bestimmt, dann hat man damit die Grundlage für jede erdenkliche Muster und Trendbestimmung geschaffen. Der Indikator Code ist so angelegt, dass sie mit diesem Gerüst leicht eine 1-2-3 Erkennung oder ein Gartley Muster definieren können. Damit wird der Indilator zum universellen Swing Trading Indikator.

Viel Erfolg!

1-2-3

Swing Trading Indikator

Der erste Schritt um diese selbst nachjustierenden Swing / Hoch- Tiefpunkte zu finden ist es, die Marktvolatilität zu beschreiben. Diese Kennzahl soll angeben, ab welcher Mächtigkeit eine Bewegung als signifikant zu beurteilen ist.  Der Indikator unter dem Chart zeigt Ihnen diese wichtige Kennzahl als Prozent an.

zum Code Passwort „code“

DAX Ichimoku Scanner Update

Die vergangene Woche brachte, dank der EZB, auch im DAX Veränderungen mit sich. Die Ichimoku Scanner Bewertung hat sich von +5 auf +2 (3*bull, 1*bear) geändert.

Hier die Sicht auf den DAX Index, Tageschart mit Ichimoku Indikator und der automatischen

DAX Ichimoku Scanner Analyse:

DAX Ichimoku

Zur Erinnerung: Der Indikator zeigt die in einer Zahl zusammengefasste Bewertung des Ichimoku Indikators. Um auf die +2 zu kommen werden folgende Punkte Vergeben:

  •  -1 Kurs unter Kijun
  •  0  Chikou in seiner Kerze und über der Wolke
  •  +1 Tenkan über Kijun
  •  +1  Senkou 1 über Senkou 2
  •  +1 Kurs über Wolke

Die geglättete Version dieses Indikators hat ins negative gedreht:

DAX Ichimoku Smooth

Soweit die DAX Index Analyse Ansicht, doch was machen die Einzelaktien?

Auch bei diesen hat sich gegenüber der vergangenen Woche einiges eingetrübt. Die Liste mit den Werten des nicht geglätteten Ichimoku Scanners zeigt die Übersicht über die einzelnen DAX Aktien:

DAX Ichimoku Scanner Aktien Analyse

ichimoku dax scan

Tradesignal Cloud Chart Heatmap

Wer lieber den ganzen Überblick hat, sich also nicht nur die Zusammenfassung des Ichimoku ansehen möchte, sondern den ganzen Markt in realtime und allen Details im Überblick halten will, der kann anstatt des Ichimoku Scanners auch die Cloud Chart Heatmap verwenden:

Tradesignal Cloud Chart Heatmap

Den Tradesignal Code der Cloud Chart Heatmap gibt es auf schriftliche Anfrage  per Postkarte gratis per mail.

Digitale Stochastic

Die slow stochastic ist ein alter Begleiter für alle Trader. Zuverlässig zeigt dieser Indikator die Überkauft und Überverkauft Bereiche an. Doch leider hat der Indikator einen entscheidenden Nachteil – er hat einen sehr unruhigen Kurvenverlauf.

Stochastic Digital – mehr als nur Überkauft / Überverkauft

 

Die Digitale Stochastic glättet die normale Stochastic nicht nur, sie sorgt mit einer digitalisierung auch für einen ansprechenden Kurvenverlauf.

Hier ein Beispiel für den DAX Future im Stundenchart.

Digitale Stochastic DAX Stunde

Unter der digitalen Stochastic sehen Sie die altbekannte slow Stochastic mit der selben Parametereinstellung. Der Chart ist grün gefärbt wenn die digitale Stochastic steigt, ansonsten ist der Chart rot hinterlegt.

Digitale Stochastic Trading

Durch den glatten Kurvenverlauf wird die Interpretation des Indikators einfach gemacht. In den grünen Bereichen kann trendfolgend long gehandelt werden. Das heißt, dass die Hochs gekauft und an den Tiefs die Position gesichert wird. Das funktioniert natürlich auch auf der short Seite: Fällt die slow Stochastic dann wird bei Unterschreiten des vorhergehenden Tiefs verkauft, und die Position entweder mit Target (und Wiedereinstieg) oder einem nachgezogenem Swing Stop geschlossen.

Hier noch ein Beispiel für den DAX Future und der digitalen Stochastic mit sehr kurzer Parametereinstellung (5-Tage)

Digitale Stochastic

 

Laden Sie hier den original Artikel aus dem Traders Magazin: http://www.quanttrader.com/download/Digitale%20Stochastik.pdf

 

zum Tradesignal Equilla Code Passwort „code“