Just a bit of a bizarre experience / anecdote. I was starting up NinjaTrader this morning (actually afternoon my local time) and was playing around with some settings and bringing up some currency symbols to check out on how the dollar is faring in the Asian session after yesterday’s bloodbath in the markets. Anyways when I was done playing with that I loaded up FDAX to start the day. Or so I thought. Turns out that instead of clicking on the FDAX on the Market Analyzer window (NT’s equivalent of a quotesheet/portfolio) I clicked on something else, only half way through the morning and following several trades I realized I was actually trading the FESX which I added to the Market Analyzer way back just to check it out. Considering it was a profitable morning I’m not complaining too much but still it was rather weird. Although not entirely surpsing as the Euro Stoxx 50 is highly correlated to the FDAX. I just looked through a couple of days of historical intraday data and it seems the FESX is like a tamer version of the FDAX. I might try watching both going forward and see which one I like more.

Here’s an example of some of what how I’m working on as part of my new trading method for futures. I’m currently only actively trading on 2 instruments – the DAX and the ES. (That is aside from the normal stocks trading I still do). I’m using the NinjaTrader simulator and I’ve been taking trades daily. I love this tool and just got a full lifetime license.

Anyways, just a small disclaimer, I’m not running it as a tight ship yet and I’m at the beginning of the process so below is just a brain dump. The reasons it’s not full on for met yet are:

1. My rules aren’t firm yet. This has a whole host of issues but I’ll get back to this in another post probably.

2. I’ve got ‘no skin’ in the game. I’m not risking real money during this development phase and that affects things. I’m not “cheating” as that will be silly but the dynamics are different – in my case I think I actually do a lot better when I do risk money in the market to test ideas.

3. I’m stretching myself and spreading a bit thin with the various markets and instruments. I expect this situation to improve after the inital steep learning curve that comes with new ventures like this.

Anyways, right to it. Some of the first considerations and decisions I had to make were way before even considering specific trading methods and rules. In some cases I drew on my experience in stocks and in other cases I had to forget and actively ignore habits and knowledge that came with trading stocks.

1. Which instruments? I decided to go with the most liquid instruments I could find in different timezones. A good trading strategy should work on almost any tradeable market. Besides liquidity I also wanted easy access, low operating costs, good intraday moves, tight spreads.

2. What timeframe? This invovles a lot of trial and error, there’s no forumla, you got to bring up charts for the various instruments you’re considering trading and just try different values to see what suits your personality and style and how fast or slow you want to go. I went with 5000 constant shares on the ES and varying constant shares on the DAX depending on the day’s action.

3. What basic trading style / approach? I’m a trend follower by nature, I’m not attracted to counter trend / range trading. I can take the lower win rates that come with it and have patience to ride longer trends. It’s also actually less work :-) Within the trend following approach I’m most comfortable with taking pullbacks. So I went with that. Price action, identifying trends, finding good risk:reward entry spots and taking a stab at it.

The next set of steps was then to:

1. Scan charts, I do this manually forward walking charts and eye-balling ideas. This is extremely inaccurate and very misleading at times as the eye/brain often sees what it wants to see. But being aware of that helps and it’s a very fast way of throwing different ideas on the table.

2. Come up with some preliminary rules on entry, exit, position size.

3. Start implementing the ideas and taking trades to test the waters. Different markets move and behave differently, there’s no substitute for taking trades on real dynamic data (i.e. either live real-time or playback).

4. Record new ideas, thoughts, lessons learned and analyse the raw data captured by NT which is really extensive.

5. Make adjustments and repeat the above.

So finally coming to an example, here’s a capture of the MAE / MFE analysis for the DAX taken from the Account Performance tab. The MAE / MFE is covered extensively in John Sweeney’s Maximum Adverse Excursion: Analyzing Price Fluctuations for Trading Management.

These results are just based on 55 trades over a few days with a win rate of about 50%. So definitely far from sufficient data, this is just to illustrate the thought process. What we can see is that after entering those trades the average move against the position (MAE) was 2.77 points, the average move in favor of the position (MFE) was 6.05 points. This is not too bad, it shows that the entry + inital stop more often than not put me in a favorable spot to benefit from some trend going my way. The bad part though is that the ETD – average End Trade Drawdown was a very large percent of the MFE. My main take-away from this small part of the analysis was that I was doing something wrong with my exits giving back a huge part of open profits. And that has an adverse effect on the profit factor.

There are many other aspects to developing trading rules. This is just part of how I go about doing it. Different traders approach things in different ways, whatever works and makes money for the individual trader is the way to go.

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Update: see a more recent take on NinjaTrader and alternatives for trading futures through a DOM over here. In short, NinjaTrader has disappointed many traders who are now looking for more stable and workable solutions.

I’ve been using NinjaTrader to paper trade futures in my free time :-) and I must say I’m really impressed with the application. I first came across Ninja at its very beginning almost 5 years ago when it still looked like this. And didn’t even have a logo yet. I tried it out but as a stocks trader never felt I really needed it. With the foray into futures I was looking for a charting / order execution / trades analysis software to augment the stuff for stocks. My first port of call was good ole TradeStation which I used back in 2000 when I was trading from Hong Kong. Alas, TradeStation has lots of nice eye candy and is probably great for building, testing and optimizing automated trading systems but for serious trading it flunks. So hence re-visiting NinjaTrader. And.. it’s got everything I was looking for and then some, like about a 1,000 different ways to enter orders so every trader can choose whatever works for them. I use 2 Basic Entry windows with different configurations and the Chart Trader – entering and updating orders off the chart itself (not the right side panel). Aside from the typical DOM and standard order entry screen, how cool is opening 2 order entry windows of the same type which you can completely customise starting from symbol, to stop strategy all the way to button colours? Besides that, you can also move queued up un-executed orders off the chart itself, making stop tightening a matter of 2 mouse clicks with immediate visual confirmation. Fantastic. There are tons of other cool features like the custom indicators, built-in trade performance analysis and integration with various broker and datafeed technologies. Kudos to the NT guys, they took the software a very long way and made it into a really nice product.

Gee, I almost forgot one of the best parts – free! Free charting, free trading simulator including playback of data and you can feed it data from IB TWS. Of course if you want to place real trades off it you have to subscribe. I wish the multi-broker option was cheaper so I wouldn’t have to think too much about which version to get but can’t have it all I guess.

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Tags: analysis software, bracket trader, chart trader, custom indicators, datafeed, DOM, free charting, IB TWS, ninjatrader, NT, performance analysis, trade futures, TradeStation, trading futures, Zeroline trader

I had way too many trades on today, it was looking OK early in the morning but then pretty disastrous later on till the afternoon when things stabilized a bit. It is obvious my trading style is having a difficulty in this current market condition. Especially with the mornings action which is a key part of my strategy and edge. I traded ILMN, PFG, SIRF, SPF, ARMHY and WOOF. The win rate is simply appalling as only SIRF contributed meaningfully to the end P&L. Plus a couple of ER2 trades which worked out OK. The end result is just +0.5R but better than the hole I was in earlier.

Off to get some sleep, I’m dead tired, been working non-stop for several days. I’ve got several projects I’m juggling, different trading styles and systems R&D. It’s fun, frustrating, challenging and overall extremely interesting but can get exhausting after a while. Nevertheless, it will continue till I get something workable in place.

I’m doing some testing of futures trading in a simulated account and I now have a short position in the ER2 which I forgot to close before 4:15. Does anyone know how I can transmit an outside regular trading hours order in IB to close this? The Order Ticket’s option for outside regular hours is grayed out.

I think this is one of those rare cases where I don’t wish it was a real order in my live account despite it showing a decent profit :-) I’d be frenetically calling IB to get out.

EDIT: Problem solved, it has to be a Limit order instead of a market order.

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As you must know, futures are all the rage now since “everyone” started trading it ;-) And I want to be like “everyone” :-) Actually the real reason is that good opportunities in stocks trading were far and few between for my trading style in the last few weeks which was a bit frustrating (on top of personal difficulties with the traveling etc.) and I’ve been wanting to add something to my trading toolbox for quite some time now, be it forex, options or something else. Also trading full time means I’ve got the time and brain capacity to put some effort into it (when I’m not being too lazy).

So I was doing a bit of R&D (OK, maybe slightly more than a bit) since last week looking through a few charts and beginning to form some sort of a strategy. Today I actually took my first futures trade, ever. In fact I took 3 trades, all on the ER. The first 2 were pre Fed announcement and were stopped out and the last 1 was after. The last one was the only winner but was sufficient to cover for the losses and make a bit of money. Generally speaking the “system” in the making is just a mix of 2 indicators and the Dummy shtick. You know, trying to find a trend, a logical
place of entry and stop and a decent risk:reward. Nothing too fancy or
colourful (yet?). I’m not going to write about every trade since I’m still quite far from firming up the strategy and how I’m going to trade it, heck I don’t even know yet how much the money I made is in ‘points’. I’m still figuring all this stuff out and just trading off charts and price action for now.

P.S.Needless to say, if this experiment goes pear-shaped I will never write about it again lol