Big Picture: DOW JONES the 9999 Red Line Support

Some of the big picture posts earlier in this blog anticipated the downward movements in the S&P because the structures were looking extremely similar to the 2008 event, in fact these structures repeat all the time in small time-frame trading.   Markets are very fractal like the larger time-frames are exactly like the small-time frames so there is no surprises at all really and can be anticipated if one studies the smaller time-frames and looks for similarities in the larger time-frame.

While nothing special can be said about the current S&P big picture chart, something very interesting is going on in the DOW Weekly.   Note the Red-line in the below DOW chart is at 9999 and there is this wide gap between the Purple and Red lines.  Purple is the top line at 18351   In structures like these, where there is this distance between the Purple and Red lines, in smaller time-frames like intra-day charts the often the price moves all the way down to the Red line.  Not every single time but more often than not.  After touching that Red line it bounces up from there is a common pattern.  Which raises the structural prospect in the larger Weekly time-frame of the DOW working itself to 9999 is very much in the cards and should not be surprising.  The other possibility is that it will move all the way back up to and beyond the purple line, dragging the Red line upwards with it eventually cannot be ruled out either but though that can happen, it is less often the case in smaller time-frames.

Thus the possibility exists, and should be taken seriously, that the DOW may travel all the way back down to the Red line which is in this case interesting value 9999   Is there an occult numerological significance to this is not clear am not a believer in such things but it is striking that the Red line is at 9999 somehow, why was it not 9958?   Why is it exactly 9999 - that's just how the chaos calculation fell out for the Red line, the Chaos Levels Indicator's algorithm computed that, it is not something placed there artificially - in fact that level was established years ago in the Weekly Chart Chaos Level computation - on precisely end of week 12/31/2004 - is remarkable that it was the last week of 2004

           

Big Picture: CL Crude Oil where will it stop falling?

Oil CL is so awesome for day trading that one often completely neglects that it is great for swing trading as well or even long term trading with large profitable moves very much in the cards.   Of course in the recent year it has fallen sharply and continues to fall.   So where might a support area be that might permit a reversal trend swing trade?  

Incorporating the remarkable Jurik JMA into the various Chaos indicators yields some great signals, to illustrate consider the following chart that provides a very early indication of the support area - that spot at $38.00 is where one should definitely cover any shorts (sell any puts) and seriously consider going long.  Sometimes price action penetrates the support by a bit and turns back up through the support, that may very well occur here but in either case that area around 38 is an excellent spot for reversal zone plays.   It could of course simply rip right through it and fall below that as well but that is less likely due to the distance between the purple line up top (which is still at $109) - rather it will likely turn around at 38 and head back up some is in the cards, enough at least to pull the purple line down from its lofty heights.    In any case the conservative course of action is not necessarily to go long there at 38 but one must definitely exit any short position once price reaches there is prudent.  And then to consider a long after that would be the swing trading plan.

Notice how extremely early the support was apparent with this indicator, it was obvious when CL was trading in the $60 range!  

On-Going Research: Meta-Systems with Customized Trading

As one observes these chaos systems especially the Tick systems, it becomes apparent that their performance curves are actually showing something about market structures.   If a performance curve of these systems is dipping, then that says something about real market states and if the performance curve is doing well then that shows something too.  

Because there is a correlation between the algorithm performance curve and market states, what if one were to try and take the performance curve itself as an input for a "meta" trading system?   In its simplest form one could literally plot a moving average lines of the performance curve and trade only when there are positive crossovers!   Or graph a channel taking trades with a system only when its performance curve is inside a channel    Technical analysis not on the market but on the performance curves of systems trading the market is the idea.  

There is actually one technical indicators vendor, Customized Trading www.customizedtrading.com  that provides Tradestation OOEL strategies to precisely this sort of technical analysis on existing system performance curves and trade them only when things are looking good    This can significantly reduce drawdowns and enhance a nice system into a really nice system

The OOEL Equity Switcher Strategy available here: http://www.customizedtrading.com/ooel/trade-equity-curve     And the process of experimenting with it to improve Chaos Tick systems is in progress.  

Possible Inaccuracy in the Minute Systems Hypotheticals?

All the Minute systems discussed in other blog posts incorporate Break-Even stops of relatively smaller tick size   There could be an issue with Tradestation back-tests on higher time-frame minute charts the "resolution" level might not be accurate enough to correctly process such lower amount break-even stops.  

This raises some troubling questions about the accuracy of the Minute systems back-testing results even though look rather outstanding they are much less impressive without the break-even stops.   This issue can be resolved by trading one or more of the Minute systems and compare the two sets of results, because even if the back-test resolution is not that great the important thing is how the Tradestation processes the system under real-trading conditions- as long as it continues to behave in the same way in the back-test, with poor resolution in real-trading all would be good.

So at some stage shall start trading the Minute systems myself in my own account regularly to settle the matter but for the time-being am knee deep in new Tick systems and Meta-systems being built on top of Underlying systems that have no real room for experimenting with the Minute systems   The underlying algorithm is the same as the tick ones but the time-frames and Tradestation inaccuracy in the minute hypotheticals is food for thought.

   

Announcing Tradestation TradingAppStore DFLAME and ESBRIGHT

Minute chart systems EMD DFLAME and ES ESBRIGHT are now available for lease in the Tradestation TradingAppStore.   These systems are very "real-world trade-worthy" from an executions standpoint.

Trade entries are market orders and therefore no such thing as 'missed trades' not a concern.  Market stops and target limit orders execute on Tradestation especially with the setting (execute at market X number of seconds if the price reaches the target).   In short these systems trade a lot like real-world trading

• https://tradestation.tradingappstore.com/products/ESBRIGHT
• https://tradestation.tradingappstore.com/products/DFLAME

Certain parameters such as profit/loss have been exposed to facilitate user fine-tuning.   Since the algorithm tends to be naturally profitable on various time-frames and chart types, there is no way for any one individual to explore all the permutations of profitability and hence makes very good sense to expose some parameters for user optimizations on different types of charts.   The default chart is the nice looking 123 minute   

DFlame Hypothetical Curve

ESBright-A Hypothetical Curve

CLBREEZE complete recovery, ESTHUNDER recovering and ESLIGHTNING struck by lightning

The chaos systems CLBREEZE, ESTHUNDER, ESLIGHTNING trade certain recurring patterns in the market; these patterns occur in cycles - with periods when they are not manifest and periods when they are manifest, over and over again.   When the relevant pattern is present the system tends to be profitable and when the underlying pattern is not present the system enters into drawdown.  

CLBREEZE recently recovered from a drawdown.   ESTHUNDER is in the process of recovering from one and ESLIGHTNING suffered a big blow last week when the ES market gapped down by 30 PTS+ it was caught on the wrong side, this can happen either on the positive or the negative direction and in this case it was caught out on the wrong side.  

Because the chaos systems track certain patterns in the markets the performance graphs of these systems actually say something about prevailing market conditions, ES looks good for trading and can be expected to make some moves based on how ESTHUNDER is recovering and looking set for some type of profitable spurt phase


CLBREEZE performance July 2015 hypothetical performance recovered from drawdown

ESTHUNDER performance July 2015 in the process of recovering from a drawdown, looking like it is setting up for a profitable spurt period coming up

ESLIGHTNING July 2015 struck down by a lightning strike of a 30 PT gap down in the ES market last week, looking like may take a while for it to recover from here

TopStepTrader Combine with Tradestation

TopStepTrader provides no direct connection from Tradestation; one solution is to send Tradestation Strategies signals into NinjaTrader is supported at TopStepTrader    Some notes on how to accomplish that are as follows because any flawed signals in trading can be catastrophic:

Ninja offers two ways of transferring trade signals from Tradestation Strategies into Ninja - using e-mail automation or using Easylanguage, directly from the Tradestation strategy code by installing a Ninja DLL into Tradestation.  The idea is to route the orders generated by Tradestations strategies through Ninja orders platform

The two methods for this sort of orders routing described here- http://www.ninjatrader.com/support/helpGuides/nt7/index.html?tradestation_integration.htm 

In reality the DLL based EasyLanguage method is difficult to properly implement and manage purely via code the various possible states that orders can be in, for instance placing a stop, canceling, revising positions, it can be complex and the Ninja DLL and associated code samples really do not suffice to build something robust enough to pass the TopStep Combine having tried it that way led to catastrophic Combine with improper, unintended trades

The E-Mail automation method is the only reasonable candidate, but with some caveats and tricky gotchas that if not properly handled would once more lead to catastrophic errors and signals mis-matches and crashing a Combine

Sending Tradestation signals into Ninja via e-mail is broadly a two step process - establishing SMTP connectivity, and then turning the Tradestation Strategy Orders display checkbox on for that particular strategy.  It is only when the orders display checkbox is turned on that a Tradestation strategy's signals start flowing into Ninja, and there are some caveats with managing it-

(1) When the signal from a Tradestation strategy order goes into Ninja and pops up in the Ninja orders list views, changing any of those values such as Stops values, or Targets values on the Ninja side manually is a recipe for disaster because then any subsequent cancelations or alterations from the Tradestation signals side will no longer match

(2) If the Tradestation strategy is already in a position when the connection is established, the position is NOT automatically matched on the Ninja side - this can be extremely problematic because a closing signal of an existing Tradestation Strategy position would actually wind up opening a new (unintended) position in the direction of the close.  For example if the Tradestation strategy was Long and sent a signal to Close the Long, that would go over to the Ninja side as a signal to open a Short!   

(3) The best case for error free operation is to establish connectivity only when there are no open positions inside the Tradestation Strategy, this can be difficult for Strategies that are always in some sort of position; in such cases one has to enter into a position inside Ninja so that it matches up with Tradestation strategy positions

Overall one must exercise caution and test it out thoroughly but it can be made to work.