Saturday, November 3, 2012

Longer Term Charts

Recently, Oanda has added a weekly period to their proprietary trading platform. As you can imagine this thing is not very exciting to watch on an active basis. However, I think there is predictive value available here.

For example, though it is difficult to catch a top or a bottom at this level of observation you can certainly see longer term bollinger events. Here is what looks like a bounce on the CADCHF.

A retest of recent highs near 0.9950, if that happens, will put 500 pips on the table. Is it worth waiting a month or more to earn some of that? Alternately, if you expect it is going to get back near those highs do you think there will be some excellent buying chances over the next month as price works its way there?

You bet!

The longer term play might involve a smaller position. You'd have to be willing to take the chance that news events will change the course of action and possibly be willing to endure hundred pip losses for weeks.

The shorter term plays, perhaps on the 1 day, 4 hour or 1 hour might be a bit more lucrative. If you are fairly certain you know what direction the price will be moving and the charts provide a nice entry setup then you may choose to put a bigger position into play for a relatively short period of time.

Just be careful. Long term charts can move a long way in the wrong direction even if you are ultimately proven right. You'll need discipline to hold on and to let go at the appropriate times.

Saturday, October 13, 2012

Robot Thoughts

It's getting easier to look at a chart and figure out what to do. For example, recently I've been using bollinger bands on the D1 and trading infrequently when something presents itself.

It's more difficult to turn this intuition into an algorithm and quantify it. I suppose I need to come up with clever ways to localize a local bottoming or topping event and then characterize the shape of it.

What I am relatively good at is finding moments of extreme extension. Unless a major new trend is about to occur these can indicate reasonable entry points. For example, if the price is getting "far" away from a moving average and price action is respecting a boundary or throwing a good candlestick event then a robot can take action based on well defined situation.

There are also "warnings" available. If the price is moving very fast then what is considered a good entry point may be a lot riskier. This type of thing can be examined across multiple time frames to detect a larger scale event while trading on lower time periods.

The latest thought and robot experiment is to collect these little nuggets of interpretation. Accumulate the "value" of a list of reasons that it looks like a good time to trade and compare to the "value" of those reasons that a trade should not be entered.

To illustrate, let's assume our robot is "thinking" about entering a long trade on the USDJPY pair:

  • Bid price is 8 pips below the m15 moving average (+ 0.08)
  • Bid price is touching the lower h1 bollinger band (+ 0.10)
  • Bid price is within one pip of middle h4 bollinger band (+ 0.05)
At the same time we have some hazards:
  • The h1 bollinger band was recently pinched
  • The previous m15 candle dropped 25 pips
Well, never mind then, a nefarious "something" is happening that the robot should have the sense to realize it doesn't understand. Wait for a clearer situation.

Perhaps many robots would be better than people expected if they were able to look for more reasons not to enter a trade?

Friday, May 25, 2012

Trader Interrupted

Once again, apologies for letting my blog languish.

Since I last posted Oanda has introduced an MT4 client. While this is good news for robot programming it's unfortunate that you have to trade in minimum amounts of 1000 units -- at least if you are trading using the MT4 client.

This has put my theoretical robot strategies out of reach on Oanda's MT4 platform as they depend on small incremental trading strategies. However, reading back a few posts, I think I should resurrect the "profit is my density" concept when I get the chance.  Back testing is free...

Anyhow, hoping to post more and more often too.