Yes, I have been MIA lately. But I did want to do an update on my previous blog post on OpenTick. So here is the latest news. Hat tip to Inside Market Data.

If you don’t know who Generalissimo Francisco Franco was, don’t worry, I didn’t either. But he was the subject of Saturday Night Live skit with Chevy Chase that was apparently a running joke on the show. Watch on YouTube.

XASAX NEEDS CASH NOW … OR AT LEAST A SUGAR DADDY

Xasax is/was the parent company of OpenTick, and they have a ‘funding crisis’. Also know a being ‘broke’. Ok, ‘broke’ is too harsh a term. Let’s just say they ran out of money.

They have put their business on ‘hold’ until it can find a buyer ( Sept ‘09 ). I am not sure what on ‘hold’ means, but if I was a customer, I would be looking for another provider.

STILL HOPE

The guy who started OpenTick and Xasax seems to be a serial entrepenuer. He has several domains ( all of which are dead ) , so you never know what he may come up with in the future. The Opentick founder apparently has a couple hundred domains registered, and I only checked a few.

http://quantumarbitrage.net
http://xliquidity.com
http://atsfund.net
http://FreeTickData.com

MAYBE IT IS FOR THE BEST

I cannot really shed a tear for those guys, they were sort of dicks. Back in the day, I talked to them about getting a feed from Xasax for my job.

They seemingly could not answer simply questions about their service, and always wanted to do a webinar. Then they would schedule and then miss the webinar, with an excuse letter a couple of days later. After it happened twice, I gave up on them. They seemed overpriced at the time. I don’t really know if they were because I never had a chance to talk to them.

MIT/LIT ORDERS MIA IN NINJATRADER

With any trading platform, there will always be ONE feature that you need that is not implemented. For me that is Limit If Touched orders with a negative offset in NinjaTrader. I was on a long trip recently and I finally had time to implement MIT/LIT for a strategy I was writing.

Long flights are great for getting work done. I will dread the day they allow cell phones in all planes.

On, on to the orders. Market if touched are a very similar to stop limit orders. They are both types of orders that occur only if the price reaches a certain level. With a Market If Touched order, once a price reaches a certain level, a market order is executed.

In Ninjatrader, there are some limitations to stop limit orders in strategies which are annoying, such as setting a negative stop price. I guess there is some reason for that, but it is beyond me. Maybe in NinjaTrader 7 they will have it for strategies.

If you have used StopLimit orders before and have seen an error about an improperly placed  order, then you know that I am talking about.

For these situations, we can use a Market If Touched or Limit If Touched order to accomplish the same thing , without the annoying errors and stopping of your strategy.

MIT / MARKET IF TOUCHED

A buy market-if-touched order is an order to buy at the best available price, if the market price goes down to the “if touched” level. As soon as this trigger price is touched the order becomes a market buy order.

A sell market-if-touched order is an order to sell at the best available price, if the market price goes up to the “if touched” level. As soon as this trigger price is touched the order becomes a market sell order.

LIT / LIMIT IF TOUCHED

Just like MIT order except that a limit order instead of a market order. This is the closest one to a stop limit order.

IMPLEMENTING IN CODE

You can only do this if you are writing code, I do not believe the strategy wizard can do this. I am not sure, I rarely use strategy wizard for anything.

This may be considered advanced programming, but it is not that hard. It just looks harder than it is. It is considered ‘advanced’ programming by the people on the Ninja Trader support forum, so they will not be that helpful.

Now for either of these orders , you have to monitor the prices, in-between bar updates. For that, we use OnMarketData. This recieves the price every time the price changes. This also increases the work your computer has to do , so be careful.

protected override void OnMarketData(MarketDataEventArgs e)

The variable e has a MarketDataType attached, and this is what you want to trigger you trade from. There are different things you can trigger from.

• MarketDataType.Ask
• MarketDataType.Bid
• MarketDataType.DailyHigh
• MarketDataType.DailyLow
• MarketDataType.DailyVolume
• MarketDataType.Last
• MarketDataType.LastClose

Mind you, not every data provider furnishes those. So when we see the price we want e.Price , if it is above our buy stop, we can then enter an order.

if (e.MarketDataType == MarketDataType.Ask)

{

Now, this is just a start, and there are a lot of things you can do with this. Such as shorting when the bid reaches a certain price and so on.

MIT definition from Wikipedia

 I have talked about behavioral finance before here .

This book caught my eye because [1] It had a picture of a lizard on it , and [2] Taleb recommended it, and I am a big fan of his even if I think he is a bit too pompous on TV.

SHORT REVIEW

Good book if you liked Taleb’s Black Swan book. It is an easy read and makes you think about how our ‘Lizard Brain’ causes us to make crappy trading decisions.  Recommended.

Keep reading for the full review.

INTRO BEHAVIORAL FINANCE

The author , Terry Burnham, worked on behavioral finance for 10 years at Harvard including teaching, which puts him in the egg head category.

The book is divided into four sections. The first part , The New Science of Irrationality, and the last part, Profiting from the New Science of Irrationality are the most interesting to me.

EDUTAINMENT

The book tries to Edutainment ( hat tip to Boogie Down Productions) , which is entertaining and educational. It does not excel at either , but also does not fail.

Edutainment (also educational entertainment or entertainment-education) is a form of entertainment designed to educate as well as to amuse.

There are a lot of stories in the book, and I think this guy would have been a pretty fun professor in class. 

 If you have been around for a while, you probably have heard a lot of these stories, but he does put them into context.  Things like German Hyperinflation, the chances of making it to the NBA and ‘This is Spinal Tap’ quotes.

LIZARD BRAIN

The book centers around our ‘lizard’ brains. Which is non ‘pre frontal cortex part of our brain. The ‘pre-fontal cortex is what we use for rational thought, trading decisions, etc.

The rest of our brain, the lizard part , is responsible for everything else. Fight or flight, loss aversion, fear of being eaten and things like that are all handled by our lizard brains.

The final part of the book gives rules on how we can invest without out using our lizard brains.

GOOD PARTS

1. Excellent intro to behavioral finance
2. Good attempt at making a subject more relatable
3. The author was bearish on the market in 2005

NOT SO GOOD PARTS

1. The book is dated. Has a lot of references to the housing crisis.
2. Tries to be ‘edutainment’, does neither well
3. The author was bearish on the market in the book

It is surprising hard to write a post about this book without overusing the term Lizard brain. My apologies.

In 1983 & 1984 Richard Dennis recruited 21 men and 2 women who both became known as the “turtles.” The program with the turtles ended in 1988, with many of the ‘turtles’ have going on to successful careers as commodity trading advisors.

If you have not hard about the Turtles there is a good book about the legendary ‘Turtles’, named “Way Of The Turtle“.

I was reading Curtis Faith’s book “Way Of The Turtle” over the weekend.  I think it is the best book on the Turtles on the market today. There may be other books that are better written or edited than this one, but I consider this one the best, as it was written by one of the original turtles.

Now with thatout of the way, onto one of the systems they used.

DONCHIAN CHANNEL

The donchian channel is a volatility based indicator. Like other volatility indicators, and especially channel indicators, the donchian channel is usually used to identify a break out of a price range.

The donchian channel is displayed as high and low bands , and therefore it looks similar to other volatility indicators such as Bollinger Bands.

DONCHIAN CHANNEL TURTLE SYSTEM

This system is the channel breakout system from the book. It consists of two parts. A n-period channel breakout, and a trend filter to only trade breakouts with the trend.

The Donchian channel is a 20 period breakout, so that you enter a position if the high or low passes the 20 period high or low.

The trend filter is a 50/300 period moving average crossover. If the 30 period moving average is higher than the 300 period moving average then only take long trades.

So this system uses this breakout to initiate trades, while still being a trend following system via the the trend filter to only initiate trades ‘with the trend’.

MY VERSION

Lately there have been a lot of trading days, so think a trend following system would have performed very well in the last few weeks ( during this bull run ). I coded this for Ninja Trader 6.5 and the source is a zip file below. Just import the zip file from the NinjaTrader utility menu, selecting ‘Import Ninjascript” and selecting the zip file.

I did not make many changes to the system for this version yet. Later I will post a more modified version of the system.

DOWNLOAD DONCHIAN SOURCE FOR NINJA TRADER 

The difference for this system is that the system works as a day trading system. The original system was based on daily prices, this one is based on 5 minute bars, although you can run it on any time frame.

I used a 2 * ATR trailing stop. The systems also exits all trades at the end of the day.

RESULTS

Well, as you would expect, it performed as most trend following systems do. Trend following systems tend to have a lot of small losses and fewer, but larger wins to make up for it.

I back tested the system on the March ES contract from 12/21/2008 to 3/21/2009. It did not fare well, losing $4475 before comms. But let’s look past that at how well it did as a trend following system.

Trend following systems are profitable less than 50% of the trades.The Donchian channel In this case, it was profitable 31% of the time.

The largest win was about 2.5 times the largest loss. The average win was almost 50% larger than the average loss. Also in line with trend following systems.

NEXT UP : MODIFICATIONS

Now that I have the base line using bog standard settings for the Donchian channel system. I want to make some modifications and post them along with modified source.

If you have any ideas you would like to see, write me at blog @ traderwerks.com

So now you have a clue to why I named this site TraderWerks. This post has been a long time in the making. Mainly because it is not just an answer for the curious, but an insight into the way I look at trading. I am by no means the worlds greatest trader, I just want to share my thoughts.

TRADING IS BORING

Trading is a lot more like working in a factory than you might think.

I focus on short term auto mated trading. Day trading you might say with a computer. When you are running systems it can be very, very boring. Really it is, since your systems make all the decisions, you are just along for the ride. Factory work is boring because it is factory work, trading is boring because it like like factory work with a better view.

On the setups I use most often, I have programmed an alarm sound when it comes time to place a order and open/close a position. Maybe 10 alerts over 6 and a half hours ( my current system anyway ). Of those ten alerts, maybe five trades will actually be signaled. I have semi automated my system, and I will fully automate one day, but for now, I am the human that makes sure a false signal is not generated by a Federal reserve speech or just a not a head fake from the ES. Most of the time, I just let the system do what it is programmed to do.

So here I am , pressing a button like a trained monkey every half an hour to an hour or every couple of hours. It doesn’t hurt my feelings to be called a trained monkey, since I am the who built the button I am pushing. But the time in between waiting for the the setup to occur is ‘downtime’. I can read email and such, but I still want to stay close to the system during trading hours.

LIKE A FACTORY

Day trading for me is not  the helter skelter of ‘Trading Places‘ ( One of my favorite Eddie Murphy movies ).

You go to the factory, do the best you can making widgets and go home and have a beer. No theatrics.

For me, my trading day is pretty much the same. I make sure my computers are running, checking out the systems, checking the previous day’s trade, updating my trading journal. Even though I auto trade, I still keep a trading journal which gives me  ideas on how to improve my systems. My trading consists of following my trading plan and following my system.

SO WHAT DOES TRADING BETTER HAVE TO DO WITH A FACTORY?

Both trading and working in factory have to do with following a plan. In trading, we have our trading plan, in a factory we have a work schedule. In a factory,  follow the work schedule and worry about your execution. In trading you follow your trading plan, and you worry about following that plan. I am sure you already have a trading plan, but in case have not written it down yet…….

A trading plan is a personal thing, so everyone’s trading plan will look different. IMHO, it should have at least three parts.

1. Entries – Your setups
2. Exits – Profit targets, Stop Losses
3. Money Management – Risk management

The first step to following a trading plan is writing out your trading plan. The key is writing it out. A trading plan is something you could actually explain to another person. The process of writing it out helps clarify our trading plan. A lot of us have vague trading plans in ‘our head’, but that is not a trading plan, that is one step from random trading. So, put together your trading plan, trade it like you are working in a factory, and you trade better.

SO REALLY, WHY TRADERWORKS.COM?

Because TraderWorks.com and TraderFactory.com  were already taken.

Timelines are indicators the draw lines across the bottom of a screen to give you a visual indication of the time during the trading day.

They can display many things, such as when different markets open and close or specific periods during the trading day.

DIFFERENT STROKES FOR DIFFERENT FOLKS

Different traders use timelines for different reasons. Currency traders will want to know things such as the time of the European open or the asian close.

Index traders usually look for periods during the day such as the open, lunch, and pre-market.

At the end of the day, timelines help you trade better by knowing what time you are in in the trading day.

TIMELINE FOR THE ES

This is my version of a timeline for the ES. The only parameter is the time-zone. By default, it is set to CST ( Chicago time ) and has settings for PST and EST.

This indicator is a little different in that it gives you a 5 minute warning before a change. When I am watching a trade, I want to know BEFORE the change. It gives me more time to prepare to enter/exit a trade.

If you click on the graphic , you will see a light green bar before the open. That is a color change that appears 5 minutes before the color changes to red. That little bit of warning helps me, I hope it helps you too.

The 5 minute bars are different sizes because I am using tick charts and they can have a different number of bars in a 5 minute period.

TIME TABLE

TW Timelines only has two colors, Red and Green. The light Green and light Red mark the transition times between two time periods.

The times for the indicator to go red are:

Opening : 8:30 A.M. Central Time
Lunch Break : 11:00 A.M. Central
Bond Market Close : 2:00 P.M. Central

These times are my preferences. The Bond pit closes at 2:00 P.M. Chicago time, and that may influence the stock market. Some people pay attention to that, others do not. If you have any ideas for other timelines, drop me a line at blog @ traderwerks.com

DOWNLOAD TIMELINE INDICATOR

I have put a banner ad up on the site for you to download this indicator when you sign up for the mailing list. I do not send much on the mailing list, but I put any updates to my free indicators there so it is a good thing to be receiving when I update indicators.

If the offer has expired, is because the free download has been cancelled, changed, folded , spindled or mutilated ( Just kidding ) . I do rotate the free indicators, so if the offer is gone, AND you are on the mailing list, email me and I will see about getting you a copy.

THINK LIKE A TRADER

Some scientists decided to do a study on how do people trade ‘like a trader’, and do they perform better when  people trade better when they ‘Think Like A Trader”.

This paper specifically takes a look at traders and loss aversion. If one ‘Thinks Like A Trader” will they be less risk averse and trade better. The answer is yes. I posted a link to the paper below.

For simplicity sake, I will define loss aversion as:

losses hurt more than gains feel good

That is taht people feel a lot more pain from losing $100 than from making $100. Thus, we make based decisions based on not making loses.

What the study did was ask the guinea pigs subjects to “Think Like A Trader” and not to worry about the losses. It seems to have worked. They have a lot of graphs and charts in the paper that you can check out in your free time.

SIM TRADING

A lot of people can sim trade better than they can trade actual money. I could have titled this post “Why I Am Great In Simulation Trading And Suck In Real Life” but that would have been just too long.

For most people, when we sim ( trading in simulation mode without money on the line ) we take more risks and tend to do better. When it comes to actually trading, we tend to suck. Time seems to slow down while we are watching every tick.

The reason some of us ( most of us ) , sim trade better than than real life trade is that were are in a better state emotionally to trade our systens and not second guess ourselves. We are thinking like a trader because we do not fear the losses.

AUTOMATED STRATEGIES ALWAYS THINK LIKE A TRADER

That is the beauty of an automated system. It is mechanical and it does think like a trader.

You should see my face when I watch the strategy trade. My strategy will make a trade and I will watch it and just want to close out the trade before I lose too much or lock in a profit. Most of the time, my strategy proves me wrong and stays in the trade. My strategy trades like a machine because it is a machine.

CONCLUSION

When I read an academic paper, I usually read the conclusion first and work my way back from there. I also read the ends of novels first, but considering how many novels I read now ( pick a number between nil and zero ) , it does not matter.

In real life, you need to fear and respect losses but not let them overwhelm your trading. Try to ‘Think Like A Trader” and don’t let the losses affect your trading or your system.

So when you can trade on a sim, and you move to trading a live account, remember to try to keep the same detachment you had when you were trading on a sim.

NOTES

The image is by Sakurako Kitsa, is a Bento box in the shape of a Starbuck’s Green Tea Frappuccino .

You can read the whole paper herepnas-2009-sokol-hessner-0806761106

3 Bar Reversal Pattern ( Strategy Wizard )

        This strategy is from an article  by Thomas Bulkowski ”Are Three-Bar Patterns Reliable For Stocks?” . It was in the  January,2000 issue of Stocks&Commodities magazine. As an aside, I want to mention, that there are a lot of things called “Three Bar Reversals’, but I am just looking at this particular one.

        This strategy was done in strategy wizard using NinjaTrader so those who are not into C# programming, can fool around with it. You can import this strategy with File->Utilities->Import NinjaScript. Ninja expects a zip file when you import so don’t unzip the file after you download it, just import it as is.

THREE BAR REVERSAL

        I coded this up in NinjaTrader ( Sorry Tradestation people ) for use on daily charts and then I tested it on one stock. I chose AAPL for two reasons (1) I love Apple computers (2) It comes first alphabetically. I also like to trade AAPL stock, it is one of my favorites trading stocks.

        It is a stop and reverse system, which means it is always in the market. When it gets a buy signal, it goes long, when it gets a sell it closes the long position and goes short. Some people like this style of trading system, some people do not.

Rules :

- Day two of the three-day pattern has the lowest low / highest high of the three days.

- Day three  must have a close above the prior day’s high/low.

- No DoJi’s

If you want the full details , you can order a reprint from the net.

I discovered this gem of a pattern while prospecting for ideas in a recent issue of STOCKS & COMMODITIES.In the interview with Kevin Haggerty was the following pattern description: One example [to determine a change in direction ]is a three-bar pattern,which is the same one that futures traders use.The stock establishes a low price as a swing point.Once the stock closes above the high of the low day,to me,that is a change of direction for an undetermined period. Using this description as a guide,I decided to formalize the shape and behavior of the pattern.

-Thomas Bulkowski

        So I tested this system from Jan 1, 2008 to today, April 4, 2009. No particular reason why I picked that date, I just wanted to start on a Jan 1. It ran for 16 months in backtesting, and the results are in the image about. You can click it for a larger image.

        Now admittedly, AAPL is a very volatile stock, that I do like to trade, so this probably does not represent your average stock. However, it has been a very volatile period and a lot of equities have been trading like AAPl stock.

        The strategy returned $84 a share over the 16 monhts, and had a win/loss ratio of 53%. Just a little better than flipping a coin but the profit came from the win /loss ratio. The wins were 50% greater than the losing trades. Average trade was over a week, which is a doable rate for the retail trader who cannot watch the market all day. The profit percentage was 4.41% percent a month.

WHAT CAN BE DONE TO IMPROVE THIS STRATEGY

        I think there is a lot to be said for this strategy. However, it is an ‘always in the market’ kind of strategy that can get caught in a downdraft. So here are some suggestions ( If you try any of these, let me know and I will update this post )

1. If used on a portfolio, use a portfolio normalization scheme for position sizes.
2. Stop Loss at support and resistance levels.
3. Profit Stop.
4. Test performance on ETF’s

WHERE CAN I DOWNLOAD THIS

        You can download this here,3 Bar Reversal Strategy . Enjoy

None of this is investment advice. This is just a strategy I coded for entertainment purposes only. Nothing more. Whatever you do with this is up to you. There is no warranty expressed, adumbrated, implied, insinuated, inferred, implicated, aspersed, or otherwise in existence.

This book was originally published by a little outfit known as RefCo. My copy of this book is originally from the Refco Private Clients Group.

Refco was a pretty messed up company. They were the largest futures broker in Chicago in 2005. It went public in August 2005, had a crisis in October and filed for Chapter 11 a few months later.

Stock went from $28 to $0.80 when it was learned the CEO was playing Enron type tricks with the accounting. The CEO  Phillip R. Bennett  earned 16 years in jail for this stunt.

AND NOW FOR THE BOOK

Anyway, back to the book. It read a little like an advertisement for RefCo which makes sense because they wrote it for their clients. It is now published by Wiley press, since their downfall.

Some of the other chapters cover things such as what are 1256 contracts ( They are a tax break for US futures traders). What regulatory organizations exist and what are their roles, such as the CFTC. Other chapters cover things like the different types of orders and the different players in the market.

Take chapter 5, “Using an Auto-Executing Trading System” for example, gives an overview of what you need to look for in an auto execution system. Not how to build one. My guess is that they would try to sell you a system if they could.

BOTTOM LINE

Nice read for a beginner to intermediate trader if you can get it from the library or borrow it. Unlike some books, you won’t get anything out of it by reading it a second time. It is a complete , but slightly outdated reference. It tells you everything about futures trading except how to actually trade futures.

I give it a C+, not crappy, but not a book I would want to give up shelf space to have in my office. It is a cheap book, you can pick it up for about $10 bucks.

* REFCO Private Client Group, formerly known as Lind-Waldock, founded in 1965. Lind-Waldock was acquired by Refco Group Ltd. in 2000 and became a division of Refco, LLC, in 2001. In 2005, the firm changed its name to Refco Private Client Group. Then the whole thing went bellow up.

Damn computer viruses. You have to keep your trading system virus free, it is a matter of dollars and dollars.

A virus infected systems, quite frankly sucks. These viruses are written by kids /gangsters/spammers or other miscreants. They spend a lot of time to get your computer infected for a lot of reasons. Sometimes they infect your computer for fun, to spend spam, harass companies or any number of other reasons that are not very nice.

Think about this , do you want your trading account at the mercy of some 14 year old virus writer who wants to send spam on your computer ? I think not.

NEW THREAT USB DRIVES

I must admit, the computer that runs my NinjaTrader strategies was infected a couple of months ago. I was shocked because I only run NinjaTrader on that machine. It was a particularly nasty virus that was crashing my machine soon after startup.

A computer virus is a computer program that can copy itself and infect a computer without the permission or knowledge of the owner. A true virus can only spread from one computer to another for instance because a user sent it over a network or the Internet, or carried it on a removable medium such as a floppy disk, CD, DVD, or USB drive. Viruses can increase their chances of spreading to other computers by infecting files on a network file system or a file system that is accessed by another computer.
From Wikipedia

    So I cleaned the virus with the help of a Linux machine, and set out to  find the source of the infection. I scanned all my Windows machines. I have a mixed network so other operating systems might store a virus on a network drive while these computers would not be infected themselves. So I scanned my network drives and still nothing.

    Finally , I started scanning my USB drives I had laying around an there it was. The same virus that had infected my machine. I had let my 9 year old nephew copy some mp3 files with that USB flash drive. Great.

CLAMWIN

ClamWin is a free virus detection program. You should not have viruses to begin with, but that is beside the point I am trying to make here. Sometimes these things happen when you least expect it. At my former firm, we ran virus checks on our machines every weekend.  Every weekend, I run still run ClamWin on my trading and development computers to check for viruses.

Clamwin is based on the open source GPL program ClamAV, which can scan for viruses on Linux and Mac operation systems. The virus definition update files are also free. Open source guys rock.

VIRUSES CAN COST YOU MONEY

Some people complain about the performance of NinjaTrader. I wonder how many of those peple have infected computers, and blame the ’slow’ computer.

NinjaTrader will use lots of memory, and viruses can cause a computer to run slowly or freeze during trading. Trust me on this one, you do not  want NinjaTrader to freeze while you’re in a trade.

Your trading computer should just be for the development and trading of systems. Do not let your 9 year old nephew download random software to your trading computer ( or copy mp3 files ).

So run ClamWin every week and keep your trading computer virus free.

FULL DISCLOSURE : (1) I have no connection with ClamWin except as a user (2) Open Source guy are great to have around (3) Did I mention it was free?

R.I.P. OpenTick

OpenTick was a inexpensive  financial data supplier. They had been around for about 5 years, and had an API you could use in your software  to access their data. They had a lot of historical data for free and the data that was not free was very inexpensive.

API means Application Programming Interface. It is how computer programs connect to services such as OpenTick or ZenFire.

On 3/16/2009 , OpenTick posted a farewell message on their website. I had used them for a few years, although lately they began to suck. They did have a lot of historical equity option data at the time which is something I needed back then.

I had not noticed because my login was still working ( for the API, not the site ).  They were a great place for free data, but that is not nearly as important as they were five years ago. Still, I had written a client application using them as a backend, which I now have to re-write for IB (Interactive Brokers ). It is not a problem, just a pain on short notice.

OUT IN THE COLD ON MONDAY

They are were my backup service.  As of Friday, any non paying subscribers will be cut off, and paying subscriber have another week to move their apps. You cannot even log into your account anymore even if you are a paying customer by the way.  So if you have any software written to their API, I think you better look to moving to a different API.

When I am running ZenFire during the day and I need to develop on another server, I often used OpenTick for my data source.

XASAX

Their parent company is XASAX or something like that. I really wonder what there people were thinking when they name a company something like that.  Strange names are o.k., but names like this require a pronunciation guide.

I had a sales call with them when I was at my last company. I for some reason, they could not call before or after the market was open, and wanted to talk near the open. When most people are busy. It is not like they are selling shutters or something. Seems strange that a company that wants to serve people who work in the financial industry, but can’t accommodate them time wise.  I think 4 pm EST is perfectly reasonable, they however did not.

I moved my schedule around, and then they stood me up. We rescheduled, but by this time, they were already on my $hit list. We talked, and the sales guy could not give me a reason why my company  should pay 6K a month for his product. Maybe there was something I was missing, but just doing colo for 6K a month seems strange.

I think five or six years ago, their product may have been great, but that was so 2003. The world has changed a lot since then. There are so many places that give low latency feeds and so many people in that space, I do not see the benefit.

And he could not tell me the benefits either. He promised to find more information and follow up, but I never heard from him again. Good riddance,  if a salesman cannot tell you why they have a good product, why you shuould use them or at least follow up, then maybe they should not be selling a $6K a month  product.

CONCLUSION

It was pretty weak to give people two weeks notice that their service for paying customers was going to be discontinued.  They say they are coming back, but who is going to write to their API now knowing they are flaky and could discontinue your service with a two week notice.  Would I want to base my next piece of software on their API’s?  No, of course not.  How does anyone know they will not just do another Houdini and disappear in another few years.

I will stick with IB & ZenFire for now.

Photo Curtesy Of Whipped Bakeshop

To opentick subscribers, friends, supporters, contributors and the rest of the community…

It has been quite a journey for opentick, and for those of you who have been with us for the ride we cannot thank you enough for the support, contributions and guidance you have given us over the course of the last 5 years. We could not have come as far as we have without you.

However, we are sad to say that the time has come for us to close the doors for opentick. However, this isn’t goodbye. In fact, it’s a new beginning. We will be introducing a fresh service with all the bells and whistles we’ve been slaving on over the course of the last year under a new name, a new website and a new level of service. Check back here in the near future for more information about the forthcoming new company and service. Of course amongst all these changes, there are some things that will remain the same – we still aim to provide a reliable free market data service, with an open architecture for a wide range of software platform support.

If you are a current paying subscriber, this March billing cycle will be your final billing cycle; at your next billing date service will be terminated. If you are a delayed or historical data user not currently paying for service, your account will be deactivated as of Friday, March 20th.

Sincerely,
opentick Staff

One day, we shall come back. Yes, we shall come back. Until then, there must be no regrets, no tears, no anxieties. Just go forward in all your beliefs, and prove to us we are not mistaken in ours.

When you convert an automated trading strategy from one system to another, there are a lot of things that will be  ’missing’. Such as a trading strategy from Tradestaion to NinjaTrader, you may not have some of the built in indicators that you had with the previous platform.

I have converted trading strategies from different platforms to NinjaTrader and ran into this problem. I ended  up creating NinjaTrader versions of a bunch of Tradestation indicators. Case in point,  this one is called Volatility in TradeStation.

Tradestation volatility is an indicator that measures the current volatility of the market. There are other measures of volatility , such as standard deviation.  It is different from things like standard deviation, in that it uses the high , low and close of a bar to calculate the volatility and not just the closing price like a standard deviation based indicator does.

You can click on the image to see a  huge image from Tradestation and compare it with the same indicator from the same timeframe on the image below.

TRADESTATION VOLATILITY INDICATOR FOR NINJATRADER

Note, that this is is a clone of the TradeStation indicator.  I got it as close as possible . This version of of the Volatility indicator matches the current TS version.

The original version in Tradestation, from the book ( See Reference Below ),  is now called VolatilityClassic. Like Coke Classic I guess.  I do think the current version is better than the original, in my humble opinion.

As you can see from the two images, they are very, very, similar.  No matter what you do, there will be small differences whenever you take an indicator from one platform to another. Such is life.

HOW TO USE THE INDICATOR

Volatility can be used in a couple of ways, the easiest would be the setting of stops. The more volatile the market, the further away you want your stops. Of course, this increases the risk. Another way is discretionary trading. Volatility sometimes reaches an extreme near the end of a move. A discretionary trader could use that to exit a trade.

DOWNLOAD NINJA TRADER VOLATILITY INDICATOR

I have put a banner ad up on the site for you to download this indicator when you sign up for the mailing list.  I do not send much on the mailing list, but I put any updates to my free indicators there so it is a good thing to be receiving when I update indicators.

If  the offer has expired, is because the free download has been cancelled, changed, folded , spindled or mutilated ( Just kidding ) .  I do rotate the free indicators, so if the offer is gone, AND you are on the mailing list, email me and I will see about getting you a copy.

Reference
Kaufman, P.J. The New Commodity Trading Systems and Methods.
John Wiley & Sons. New York 1980. Pages 99-101

FREE INDICATOR OF THE MONTH

I have decided to release some of the indicators for NinjaTrader I have written when translating Easy Language strategies to Ninja Trader. So I will post them for download for a month, or until I replace it with another indicator. So I guess technically , it should be “Free Indicator Of The Moderately Indeteminate Time Frame With A Median Time Of One Month”. While technically correct, that would be too long for the title of a post. As well as boring.

TRADESTATION

A lot of people are moving from TradeStation to NinjaTrader. There could be a lot of people moving the other way, but I would have no idea, since they would not be contacting me.

I try to avoid writing EL ( Easy language ) code anyway, I prefer C# to EL. That is just me, I know a lot of people who love TradeStation. Now if I could just get an application that was written in C++ on Linux…….

COMING UP

I am releasing the TS Volatility Indicator (a Tradestation indicator converter to NinjaTrader ) first. I will release the VolumeRatio ( also a Tradestation indicator converter to NinjaTrader ) and my Opening Range indicator in the next few weeks. So get on the list and get them mail to you when they are released.

Photo Courtesy kalandrakas

We wanted to wait for Ninja Trader 7 which was supposed to be released at the end of 2008, but has been pushed back. I am sure this is NOT a waiting for Godot type of delay, Ninja Trader 7 will be released, but this is the way software developemnt goes sometimes. Unless you are Microsoft, then it is the standard. So we are going to start releasing all of the ACD indicators we have for Ninja Trader over the next few weeks for Ninja Trader 6.5. Hopefully, there will not be a lot of changes between NinjaTrader 6.5 and NinjaTrader 7.0.

THE LOGICAL TRADER
For those of you who don’t know, ACD is the method outlined in the bok, ‘The Logical Trader’, by Marc Fisher. I don’t think anyone uses ‘pure’ ACD anymore, but there is a lot of good stuff to take away from the book.

GODOT
NinjaTrader 7 AS OF THIS POST is supposedly scheduled for a second quarter 09 beta. ‘Nuff said. For those of you who do not like plays, Waiting for Godot is a play by Samuel Beckett, in which two characters wait for someone named Godot. Godot never shows up.

The photo has nothing to do with ACD, NinjaTrader, or Godot. I just like auto show girls. You can click on the image to make it bigger.

If you are position trading or cross margining, these problems probably won’t make you lose to much sleep.

Don’t get me wrong, I think IB has some great features. You can trade anything , futures, options, and stocks in the same account. It is a good step up from the pure retail firms like ScottTrade, etc.

So here are the four things you need to know if you are serious about trading futures with IB.

Number 1 IB does not send every trade. What you are seeing is a ‘combined’ feed. Three times a second it bundles up the trades and sends the summary to you. This saves them a lot of bandwith but it costs you accuracy. That sucks. If you are a manual trader, sure , you would probably never notice but computers do notice.

Number 2 Backfill. This is soooo bad you would not believe. Imagine you train and back test your system over historical data. IB sends ‘corrections’  in the live  datafeed up to 30 seconds later. So a price you see for a trade , may disappear 29 seconds later. Horror.

Number 3 Margin for day traders is high. If you are doing short term auto trading, you can control your risk. I don’t think you should be trading with $400 Emini margin ( also crazy ), but I think the margin that IB charges goes to the other end of the scale. They were charging $6K per E mini contract a few months back, which is insane if you are a high frequency trader.

LONG REVIEW
I read a lot of books ( when I have the time ) and I came across this one and I was pleasantly surprised. I didn’t pick up THAT much from the book, but it is well worth the read. It codified a lot of thoughts I have had over time and that is always a good feeling.

GOOD POINTS

It is not as ‘formally’ written as a lot of trading books. It reads more like a conversation with someone who has been trading for a while. If you are a ‘advanced’ retail quant trader , then this is a book for you. Gives you insight how the home quant traders can beat hedge funds in investment performance. The author has worked at hedge funds and quant shops so he knows what he is talking about.

BAD POINTS

So now that I have given you the good parts,  the bad parts about the book  is that ‘lightweight’ if you are a heavy in quant type trading ( like a large fund ) and it is a bit short at 160 odd pages. Then again, if you are using NinjaTrader you are probably more in the ‘non-billion-dollar-hedge-fund’ area of trading like me.

CONCLUSION

If you plan on using Ninja Trader to auto execute a strategy, I would recommend this book. If you are just interested in learning about quant trading for the single investor, I would really, really recommend this book.

The author has a blog so you can check that out also.

If you notice the data, yes, it is fake data. This indicator does not run on historical data, so you need to run it live, or use replay data.

You could also use simulated data like I did when I developed this, but it is probably not much use unless you like imaginary trading.

Here is the download

Ninja Trader Innenstaebe.
Click import and point to the downloaded zip file.

If you have any question, please contact us.

        I am finally digging myself out of a huge pile of work, and this week I will have more time to catchup with things at TraderWerks.

CUSTOMER SERVICE

       We now have someone just to handle customer support issues and emails. It was getting too much for us. We like to be timely in responding to emails and another set of hands will lighten the load. 

        We have a dedicated customer service email at customer @ traderwerks.com. This is the quicket way to contact us. The old gmail addresses is being phased out, so all of our emails will now end in traderwerks.com.

So if you have a product question, drop us a line at sales @ traderwerks.com and for support  email us at customer @ traderwerks.com. 

COMING IN 2009

        The biggest thing we are doing is moving the website around. It will still look the same, but will work a lot better. We are redoing all the ‘plumbing’ that does stuff behind the scenes. We also have installed a CMS (customer relationship management) that will improve our service. There is a learning curve, but it will be worth it in the long term.

HAPPY HOLIDAYS

I would like to wish all of you happy holidays.

HARD DRIVE FAILURE

Well, I am back from the dead. My laptop is anyway. About two weeks ago, I was going on a road trip. I was doing some buisness, seeing family and attending the 2008 FIA show in Chicago. So the night before I left , I backed up my laptop, loaded up my laptop with everything I will need for the trip.

So everything was going smoothly, and I thought it was going to be a nice trip, and then the first time I powered up my laptop…

Blue screen….

Argh. My laptop was dead. I have a Apple, which does not blue screen often, but when it does,it is pretty bad. It means there is a problem with the operating system. So my first stop was the Apple store. After a few days of camping at the Apple store everyday, I had my laptop back. Still functionally dead however.

Turns out my hard drive was dying and was starting to having bad sectors. When I loaded up my laptop, I apparently moved something from the operating system onto one of these bad sectors causing the blue screen. Apple said that I did not have enough bad sectors to warrant a hard drive change, and even if they did, they would only replace it with a hard drive of the same size.

RECOVERY

Do I believe this story? Don’t know , seems far fetched to me, but my laptop was dead, and now it is sort of dead. They managed to get an older copy of the OSX installed , but I could not access my files. ( Long story ) They also had to delete a lot of things I needed to make room when they were working on it. My laptop had turned into a very expensive paperweight/boat anchor.

My backup was back at home, so I really couldn’t use it for the rest of the trip. Luckily, I do hourly backups. Yes, hourly. I use Tine machine, and here is a little blurb from the website that can explain it better than I could.

Anatomy of a backup.

For the initial backup, Time Machine copies the entire contents of the computer to your backup drive. It copies every file exactly (without compression), skipping caches and other files that aren’t required to restore your Mac to its original state. Following the initial backup, Time Machine makes only incremental backups — copying just the files that have changed since the previous backup. Time Machine creates links to any unchanged files, so when you travel back in time you see the entire contents of your Mac on a given day.

Timing is everything.

Every hour, every day, an incremental backup of your Mac is made automatically as long as your backup drive is attached to your Mac. Time Machine saves the hourly backups for the past 24 hours, daily backups for the past month, and weekly backups for everything older than a month. Only files created and then deleted before the next hourly backup will not be included in the long term. Put another way: You’re well covered.

We have a development server here, which holds all the revisions for the software we write. That code is always backed up inside our version control software. That is however on our intranet and I also could not access it until I rebuilt my machine.

COMEDY OF RE-INSTALLATION

When came back, it was a comedy of re-installation. First, I had a new hard drive installed, and nice larger drive. Then, trying a full re-install, etc. etc. So what happend you ask ? I have everything backup of data & user files, but I did not have a current backup of applications ( which was intentional ). And I lost all of my security ( encryption , etc ) which was also intentional. I keep my encryption information elsewhere.

I had to try a few different things to get my machine back up and running, which I won’t go into. I did not have many ‘gotcha’ moments, more like a lot of ‘nope, try again’ moments. But in the end, my machine is back with all the data.

MORAL OF THE STORY

So the moral of this story is backup. And get a mac. Hard drives are hard drives, but a mac can make your life much easier. I use Time Machine for backup, which is the easiest to use incremental backup I have ever used. Sometimes it is too easy.

So I am sure everyone here backs up their computers religiously. Yeah , right. If you are not doing backups, which I think is most of you, you should start. If it is too hard, get a mac, and use time machine.

I didn’t mean for this post to seem like an advert for Apple computers. I have no connection with Apple, just and enthuestic user. Yes, I also use Windows and Linux computers, so don’t give me that Apple ‘fanboy’ crap.

Now, take the ES 9 S&P Emini 500 ) for example, which has a 0.25 tick size. One half of a tick would be 0.125.

If the foo is 936.37, then  Round2TickSize (936.37) = 936.25 ( 0.12 difference DOWNWARD)

if the foo rises 0.01 to 936.38 , then Round2TickSize (936.38) = 936.5 ( 0.12 difference UPWARD)

And since a picture is worth a thousand words, a table has to be worth something. So here is a table of examples to wrap up this post.

1. DMIndex
2. ParabolicSAR
3. Pivots
4. DMI

DMIndex

The most signifigant was the addition of the DMIndex. The Dynamic Momentum Index (DMIndex) as developed by Tushar Chande and Stanley Kroll and outlined in detail in their book The New Technical Trader. It is a variable term RSI which makes the RSI more responsive to short-term moves. The more volatile the price is, the shorter the time period is.

ParabolicSAR

The ParabolicSAR no longer a minimum acceleration factor. Before, the factor had a minimum of 0.2. Now, you can use any value such as 0.0 or 0.1, although I do not know why you would.

So I coded up a NinjaScript strategy to trade the gap trade and took a look at RIMM. No real reason I picked RIMM, it is just one of those volatile internet type stocks. I have not tested the strategy on other stocks, but feel free to test it out.

Nine trades , all profitable, for a cumulative profit of 21% over the last couple of weeks. I have not done testing on other stocks, but it seems like the gap trade is working now.

Take a look at the image on my right. You can click on it to get a full size image. This is an image of the strategy analyzer, which is backtesting. The total net profit was $9.53 over two weeks which is not bad for a $44 stock. If you will notice that there were five trades, with four long trades in this market. The market has been wild so this strategy has been making long trades after some of these selloffs.

You can download the Gap Trade Strategy here. You need to run NinjaTrader 6.5 which pretty much everyone runs. You do have to register it, but it is mainly so you can read the legal mumbo jumbo that my legal guy wants. You just have to read the license and click ok.

DOWNLOAD Gap Trade Strategy

HOW TO USE THE STRATEGY
[1] The strategy only works on intraday data, not daily data.
[2] There is also only one parameter and that is the percentage of the gap for the trade to occur. So a setting of 2 would be a 2% gap.
[3] The strategy closes all trades at the end of the day.

This indicator is not designed to be used by itself. If fact, if you use it alone for trading, I think ….. well you know…. you would get taken to the cleaners.

So pair this with Stochastics or MACD , or whatever you wish.

     Such is life. All the old indicators that you have downloaded will still work, so no worries. But if you do have any problems, email me or leave a message in the support forum.

• %b, pronounced ‘percent b’, is derived from the formula for Stochastics and tells you where you are in relation to the bands.
• BandWidth tells you how wide the Bollinger Bands are on a normalized basis.

You can read more at the VIX and more blog. I don’t trade VIX options, but I do enjoy Bill Luby’s blog.

DOWNLOAD

TW %b Indicator