ACTIVE TRADING WITH TRADESTATION AND THE STOCKSCORES STRATEGIES

Transcription

1 ACTIVE TRADING WITH TRADESTATION AND THE STOCKSCORES STRATEGIES WORKSPACE/DESKTOP LAYOUT There are infinite ways to set up your Tradestation layout; how you do it is a personal preference. The process for trading the Stockscores strategies requires some components be present. Below are single screen Swing Trading and Day Trading Workspace layouts. You could set each layout as an individual Desktop if you prefer. Traders can increase their efficiency and effectiveness by having multiple monitors. This allows for the display of more chart and larger viewing areas for Radar Screen windows. Having multiple monitors won t make your strategies work better so I always stress that traders should focus on their trading skill before they build sophisticated computer systems for trading. More monitors will not make you more disciplined. Use the layouts below as a guide to create your own. SWING TRADING FIGURE 1 A SINGLE SCREEN SWING TRADING LAYOUT FOR A WORKSPACE OR DESKTOP 1. Daily Chart Minute Chart with the Action Candle Analysis Technique plotted 3. Scanner 4. Radar Screen to filter for number of trades, up for the day, above the open 5. Radar Screen to calculate indicators, Action Candle, Action Candle [1], Action Candle [Input} 6. Market Depth DAY TRADING

2 FIGURE 2 A SINGLE SCREEN DAY TRADING LAYOUT FOR A WORKSPACE OR DESKTOP 1. 2 minute chart with the Message Candle Analysis Technique plotted 2. Daily chart 3. Scanner 4. Radar Screen to filter for number of trades, up for the day, above the open 5. Radar Screen on the Daily interval to filter for Abnormal volume using the Volume Test indicator 6. Radar Screen on the 2 minute interval to filter for Message Candles using the Price Test indicator FIGURE 3 THIS WORKSPACE COVERS SIX MONITORS. THE SAME FUNCTIONS AS A SINGLE SCREEN LAYOUT, JUST MORE ROOM FOR MORE CHARTS.

3 IMPORTING THE STOCKSCORES INDICATORS Stockscores Active Trader students can use the proprietary Stockscores indicators for Tradestation. These include the Action Candle Show Me for swing trading, the Message Candle Show Me for day trading, the Price Test Indicator for finding abnormal price movement and the Volume Test Indicator for finding abnormal volume. When you are ready to use Tradestation, send an request to for the Stockscores indicators for Tradestation. To import the indicators in to Tradestation, do the following. 1. Save the file to your Desktop or some other folder where you can find them 2. Open and log in to Tradestation 3. Select File, Import/Export Easy Language 4. Select Import Easy Language file, click Next 5. Specify the location of the file that you saved in the first step and click Next Once loaded, you will find the following indicators have been put in to your Tradestation application: *Action Candle *Action Candle[1] *Action Candle[2] *Action Candle[input] *Price Test1 *Price Test2 *Price Test3 *Volume Test1 *Volume Test2 *Volume Test3 Message Candle The Action Candle indicators are Show Me studies. That means they display a dot on the candle that fits the criteria of the candle. This indicator looks for candles that are up abnormally, above their open and trading abnormal volume. That could be on a 2 minute, 13 minute, daily or whatever time interval your charts are set to. You can also display the Action Candle indicator in a Radar Screen window, it will display the price of candles that are up abnormally on abnormal volume in whatever interval you have Radar Screen set to. The reason there are four versions is to allow for a lookback. *Action Candle looks at the current candle to test for whether it is abnormal. *Action Candle[1] look back on candle, *Action Candle[2] looks back two candle and *Action Candle[input] allows you to look back the number of candles you specify. For example, if you want to know whether the opening, 13 minute candle of the day was abnormal after the market closes, set the input for *Action Candle[input] to 29 and it will consider the first candle of the day since there are there are minute candles in one day. The Price Test indicators test allow you do a price test for abnormality, I have provided three of them so you can do a few different price tests. For example, if you enter absvalue(open close) as the input, the indicator will test to see if the height of the candle body is abnormal. Change that to absvalue(open[1] close[1]) and it will do the same

4 test on the previous candle. You could also enter (close close[1])/close[1] and the indicator will test for price change from one candle to another. The Volume Indicators allow you to do the same test for abnormality, I recommend that you enter an input that reflects a volume criteria. I typically just enter Volume as the input here but, if you using this indicator in Radar Screen, you may want to have three volume test columns, one for volume, then volume[1] and volume[2]. This allows you to see if the current candle, the previous candle or the candle two ago is trading abnormal volume, You can see what is happening now but also on the previous two candles. Finally, the Message Candle indicator is a Show Me study that displays a dot on the candle if the body height of the candle is abnormal. You may find that the dot does not show up on every tall candle if you also have the Action Candle displayed on the chart as the dot displayed can cover up the dot of the other indicator. They both display the same way. RADAR SCREEN FILTERING Radar Screens allow you to see the values for an Indicator, or if a Show Me has been triggered, on a large group of stocks. You can monitor 2000 symbols for basic trading information and 1000 symbols for the calculation of up to 30 Analysis Techniques. Each Radar Screen window operates on the time frame that you specify. You can set the time frame to Weekly, Daily or an Intraday time frame like 10 minute. For the Stockscores Strategies, we often require the testing of Analysis Technique values on different time frames. For example, when Day Trading, we want to look at stocks that are likely to trade at least 10,000 times a day. We want to consider stocks that are trading abnormal volume for the Daily interval but with Message Candles on the 2 minute interval. This requires we run multiple Radar Screens and use the logic of the strategy rules to run a process that focuses us in on the stocks with the best potential. In this example, we first look at stocks that are liquid with a Radar Screen that only consider the Trades. That way, we can load up to 2000 symbols and grab those that are likely to trade 10,000 times by the end of the day.

5 We can grab the most active stocks from this Radar Screen to copy and paste in to a second Radar Screen on a daily interval to calculate whether the volume is abnormal. By sorting this Radar Screen by the Volume Test indicator, formatted to test for Volume, we can put the most abnormal volume stocks at the top of the list. We can then grab the most abnormal volume stocks from this Radar Screen and paste in to another one that is set to the two minute interval, looking for stocks that make a Message Candle. We insert the Price Test indicator in to this Radar Screen with the input set to absvalue(open close) to measure whether the body of the candle is tall, a Message Candle. Notice that I have three Price Test indicators in this Radar Screen, the Price Test 2 looks back to the previous candle using the input absvalue (open[1] close[1]). Price Test 3 looks back two candles ago with the input absvalue(open[2] close[2]). To format the indicator, right mouse click on the column heading and select Format Analysis Technique. You can then enter in what you want the indicator to calculate. I sort this Radar Screen by the PriceTest field to put the stocks making abnormal price moves at the top of the list. I can also set an Alarm to ring if a stock has a PriceTest value greater than 1.95, indicating it is making an Action Candle. This is the process for creating the Day Trader Watch List. We use the same concept when looking for stocks that meet the criteria of other Active Trading strategies. In general, consider the rules for the strategy and then come up with a process to filter the market using Radar Screen windows.

6 SCANS The Tradestation Scanner is the first step in identifying stocks that meet the strategy rules. It is the tool we use to get our symbol list that is then dropped in to our first Radar Screen window. For example, if we are creating a Day Trader Watch list, one of our basic criteria is to only consider stocks that are actively traded. So, you can create a Scan that seeks the most active 2000 stocks. I prefer to focus on stocks over $0.50 so I have added in a filter for that. Here is the Scan Criteria window for the Format Scan function in the Scanner. Often, I only want to consider stocks that are up for the day and between a certain price range. For that, I add in a Scan filter for %Change 1 Day that is > 1%. Experiment with adding different filters to meet the criteria of the Strategy that you are trading. Look at the rules and come up with the best process combining the Scanner and Radar Screen windows to build a short list of stocks for you to consider. REWARD FOR RISK LINES

7 The Reward for Risk lines are essential for determining our exit points and sizing positions. We can modify the Fibonacci price retracement tool to display the lines as we need them to look. To do this, first click on the Fibonacci tool button in the toolbar. You must click on a chart to make these icons appear in the toolbar. Now, plot the indicator on any chart. We are going to modify the settings of the indicator so how you plot it does not matter at this point. Right mouse click on the Fibonacci lines that are on the chart and select Format Fibonacci Price Retracement Lines. This box will appear but the numbers will be different. Change the values in the Settings tab to match those shown below: Activate the Set as Default box and click OK. You have now formatted the indicator to draw our Reward for Risk lines any time you activate the tool:

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