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    TradeStation

April 16, 2023

The best way to learn risk markets and trading

The best way to learn about markets and trading…

and how to prepare a trading plan is by learning through trading systems. Because trading systems encompass all the things that an experienced trader is looking at during the trading day, weeks, and months to organize his thoughts into a trading plan.

See the eight-minute video below on two swing trading systems

A system gives you the ability to do several things at once without several decades of learning and you do not need to be a program coder to do this.

All indicators in all systems no matter if they are oscillators, breakout bands, or moving averages are trying to do the same thing to predict the market for profit.

They are trying to predict the movement of the market to an extent that it generates profit net commissions and slippage. So, the trader and the system are the same things. The only difference is that while trading systems are good you will never find a computer-driven trading system that is great.

Here is an important fact, there are great traders.

As a mechanical systems trader what you are looking to do is take advantage of a positive mathematical expectation, the average trade stat. Like the one seen in this report.

The example here shows the Trend Walker on Crude with an average trade of $1,547.57. So, every time you take a trade on average you should make near that amount. In general, that is how the majority would love to trade at the top of the average bell curve. With discipline, a system provides and assumes you are taking every trade. The Crude oil Trend Walker has a good Average win to average loss ratio of 2.14 to 1 on all trades with an edge favoring the short side, as you can see.

Trading with discipline puts the trader where most investors want to be at the crest of the bell curve. It can be equated to the buy-and-hold trading plan promoted by the brokerage and funds industry.

So, the point is that trading for an average, be it from a system like Trend Walker or Buy and Hold S&P, which averages 12% per year, does not avoid the traditional periods that are not conducive to their methods. Hence, they are caught in bear markets or max drawdowns as we say in the systems development and trading sector.

So, to be a great trader, one needs to understand what it is to be an average one and what the risk of that kind of investing happens to be, and to turn that risk into their own opportunity.

I feel you can see how systems trading makes a good foundation for the learning experience. Along with these insights, by investigating training systems you will pick up more than the technical vocabulary, the terms used for the various tools. Some are common in all platform’s tool kits, and some are proprietary.

You will also gain an understanding of the difference between price-based entries and price-based exits as opposed to money-based entries and exits. You will realize what the interplay is between risk and reward, and what faster entries mean regarding your overall risk compared to slower entries.

You can visualize a system of any kind, even buy, and hold a diverse portfolio of shares with a variance developing around it. Such an envelope depicts the risk and reward fluctuations it will go through in time, which is a money wrapper. Just like profit targets and stop losses they have nothing to do with being right or wrong in holding the position.

Because the market doesn’t care about your money or your account size. If you contract or expand one side or the other or both how does that impact the overall performance of your system? But tell you nothing about being right or wrong about the investment. It’s about the investors’ money strategy and their temperament toward risk and account size.

So, these interplays are something that you learn through the understanding and the trading and the measurement of trading systems.

You must learn all the above before you can start any sizing exercises or portfolio allocation rules because you need to have the numbers first. You need to have the numbers from what your trade plan, your system, is going to generate for you in the future before you can do position sizing or asset allocation for the money.

So, these are all the things that trading systems can bring to the individuals who want to learn the markets instead of trying to learn what it takes many of us careers to learn in trading. To learn all the nuances of the elements of time, and the complicated issues of extra market events that can have an impact take hands-on experience. Learn what risk is and how to see it and when the time to take advantage of it.

To be a great one either you are born into it or it takes layers of time to learn. So, if your goal is to be great you still have to be good first and my suggestion is the use of training systems as opposed to being a gunslinger for all the above reasons.

So along with three swing trading systems, you have one on one access to the master once a month plus DM on LinkedIn with questions and answers when they arise.

Since the 1990s my systems have retailed for $5k locked code, and prices go up from there if open code is needed. TEM can be used visually, even if the hard code is programmed in the systems. Your choice of one of three swing traders for the lease period. Workspaces include TEM volatility model.

$595/Quarter or
$1,595/year
At the end of the training period, you can own the system net what was spent on training.
Locked code $4,995.00 no expiration date

 

Contrary Thinker insuring your future in the global equity markets.

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2023

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice at any time. Digital products are not returnable or refundable

–Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

Great and Many Thanks

Jack F Cahn. CMT

February 26, 2023

Indicator / Strategy Coppock Curve

Extra from Contrary Thinker with Code Junkies Bundle

The Coppock Curve is a momentum indicator developed by Edwin “Sedge” Coppock, who was an economist by training. Coppock introduced the indicator in Barron’s in October 1965. The goal of this indicator is to identify long-term buying opportunities in the S&P 500 and Dow Industrials. The signal is very simple.

Coppock used monthly data to identify buying opportunities when the indicator moved from negative territory to positive territory. Although Coppock did not use it for sell signals, many technical analysts consider a cross from positive to negative territory as a sell signal.

 

The Rate-of-Change indicator is a momentum oscillator that oscillates above and below the zero line. Coppock used 11 and 14 periods because, according to an Episcopal priest, this was the average mourning period when grieving the loss of a loved one.

Coppock theorized that the recovery period for stock market losses would be similar to this timeframe.

The Rate-of-Change indicators were then smoothed with a weighted moving average. As its name implies, a weighted moving average puts more weight on recent data and less weight on older data. For example, a 3-period WMA would multiply the first data point by 1, the second data point by 2 and the third data point by 3. The sum of these three numbers is then divided by 6, which is the sum of the weightings (1 + 2 + 3), to create a weighted average. The table below shows a calculation from an excel spreadsheet.

Signals

Using monthly data, this indicator will not trigger very many signals. A buy signal triggers with a cross into positive territory, while a sell signal triggers with a cross into negative territory.

Unsurprisingly, there have been only five signals since the late 1980s. The chart below shows the last four signals. The first signal triggered in 1988, which was after the 1987 crash.

Chartists following the two sell signals would have avoided the last two bear markets. The February 2001 sell signal would have avoided most of the bear market from 2000 to 2002. The June 2008 sell signal would have gotten investors out before the market plunge in the second half of 2008. These sell signals could have been used to simply exit the stock market and move into cash, which would have lowered market exposure and overall risk.

Flexibility

As noted above, the Coppock Curve is simply a smoothed momentum oscillator. The Rate-of-Change indicator measures momentum and the weighted moving average smooths the data. This means the indicator can be used on any timeframe. Intraday, daily, and weekly data can be used to fit one’s trading/investing style and time horizon.

The chart below shows the Coppock Curve using weekly data on the Dow Industrials. As expected, the weekly chart produced many more signals than the monthly chart.

In addition to different timeframes, the parameters can be adjusted to make the indicator faster or slower. A shorter Rate-of-Change setting will make the Coppock Curve more sensitive and faster, while a longer setting will make it less sensitive and slower. The chart below shows daily bars for the Nasdaq 100 ETF (QQQ) and the Coppock Curve (20,10,10). This setting makes the Coppock Curve a little less sensitive, which may be better suited for daily charts.

Conclusion

The Coppock Curve is simply a smoothed momentum oscillator. Even though it was originally designed for monthly charts and long-term analysis, it can be used on intraday, daily or weekly charts and the settings can be adjusted to suit one’s style. The main signals are generated with crosses above and below the zero line. More aggressive chartists can consider looking for bullish and bearish divergences to anticipate such crossovers. Use caution, however. Divergences do not always result in trend reversals because the trend can simply slow and continue in the same direction.

The Coppock Curve can be found in the indicators section below the chart. Users can adjust the settings by changing the numbers in the Parameters box. The indicator can then be positioned “behind price,” “above” the main window or “below” the main window. It helps to change the color when placing it behind the price.

Idea, add a moving average using the “advanced” options. This moving average acts like a signal line, similar to MACD.

Idea, This simple scan searches for stocks where the Coppock Curve crossed from negative territory to positive territory and daily volume was above the 50-day moving average of volume. In other words, the bullish crossover occurred with expanding volume.

Contrary Thinker insuring your future in the global equity markets.

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

December 20, 2021

iCahn Day Trade Stock Index Futures

%BB Dynamic Breakout and Reversal

The development of a trading system first considers its time horizon

Since the strategy %BB-DBR is day trading then by definition, it must exit on or before the end of the day. This is a key to understanding how and why day traders do and act as they do because they must be correct for a limited period, not days weeks months but within hours.

With that being the case our job is to find a pattern that will become profitable by the end of the day. A traditional day trading system is looking for a setup leading to what is called a range day. That is a trading day that opens near its low closes at or near its high and the system takes the trader long. It does not matter what kind of entry, it could be a breakout or a reversal.

So, if the market opens and declines from the open, a reversal pattern takes the systems shortly, and prices closed at the low of the days is the ideal pattern. Therefore, when the developer finds a pattern that is profitable with good risk to reward ratios without the constraints of money stops, he has a technically sound strategy. That is one that tells him he is PROBABLY correct by the end of the day his position will become profitable.

Here is an example of a breakout that closes at the end of that day at the high of its range. The open was near the low of that day’s range, followed by a breakout and the exit MOC.

The efficacy of entry is just another way of pointing out how much the position had to go underwater before it became profitable. Some trades are perfect getting in at the low and out at the high; some never go underwater, others are less efficient and do go underwater before going profitable or going out for a loss.

Money Stops put first in trading development is the opposite approach. The developer uses an arbitrary money profit target and a money stop-loss that fits his account size first and from that basis searches for a valid trading strategy that is profitable.

With our approach, the money stops, or percent stops are brought into the systems AFTER we have a profitable system – the money stops are brought in like an envelope.

Refer to our text on money stops, link here. One of the critical elements that a successful trader needs to get their head around is the difference between money and price. Money management is not the same thing as risk management. This is not a little point that is squabble about.

You cannot make a good money management program and apply it to a bad trading system and make it better. NO MATTER HOW GOOD THE MONEY MANAGEMENT METHOD.

You can take a good money management strategy and apply it to good trading systems and make it better. Money management is about how much the trader should risk and money stops (both loss and profit). The size of your trading position is in direct proportion to the value of your portfolio.

The rule you hear about being chased by the vast majority is the 1% rule to use a stop that is equal to 1% of your account size on the trade. The market could care less.

Risk management is nothing to do with stop losses or anything relative to account size and from our school of thought nothing to do with the trade by trade p&l – based on neither real nor hypothetical trades. Fancy algorithms based on the trailing P&L are just elaborate ways of chasing the equity curve.

Proper risk management is based on price; it answers the questions should I or should I not take a risk. Our systems have a risk management formula built-in, and we use the same model as a governor for opportunity management. See 14-page User Doc, with rental or purchase.

You can download the TradeStation Reports here, be sure to check out the amount used for slippage. 
Three Months for the Price of One, only $119.00 with the right to own outright GFE for half price of $2,495.00 before your three month period ends



 

Do you like to hack around in concept idea code, systems, and indicators from my library over 20 years of development?  Look at this holiday offer on over 1000 strategies and 1000 indicators.

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2021

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its client’s trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

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