I am going to have an experiment here to test out automation of trading SRS and FAZ. I do not know if it works. It just might. I will open 2 small positions, 5k each in SRS and FAZ.
The set-up is simple. I am looking for an engulfing bar using the 60 min charts. The engulfing bar must be big enough to engulf(cover) the last significant red bar. A market order will be sent right after the close of the engulfing bar. Here is the illustration of the engulfing pattern.
Here is the Set-Up
- Go long right after the close of the 60 min engulfing bar
- Stop Loss will be 5%. If it gaps down by 10% and it will be considered 2 losers in row.
- And the risk/reward ratio will be 1:5. That makes it 5%:25%
A good outcome will be anything that I do not have 5 losers in a row. The experiment will finish either when one hits the target before sustaining 5 losers in a row or when it loses 5 times in a row. It will start from Monday. The computer will totally take emotion control out of my hand. Let’s see how it works. I think it is going to beat me. The trades will be excluded from my portfolio. Feel free to ask me questions.
Here are the 60 min charts of SRS and FAZ at the end of 4/17/2008.
Here is the ongoing experiment: Day 1 Day 2
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What are you using to automate the trades? TradeStation, Ninjatrader, etc.?
Posted on April 19th, 2009 at 10:52 am
I use tradestation. I will monitor it closely just in case it malfunctions. Sometime it does.
Posted on April 19th, 2009 at 11:03 am
This will be very interesting, I am riding positions in both going into Monday!
Ray The Money Man’s last blog post..Not Yet, Not Yet……
Posted on April 19th, 2009 at 12:55 pm
Perhaps you should try back testing the strategy before committing real money to it?
Posted on April 19th, 2009 at 10:11 pm
I already did. I have to test it with real money now. They are very small positions. I will also evaluate Ninjatrader. It seems like a very solid platform. It works with Interactive brokers with which I might open another account
Posted on April 19th, 2009 at 11:21 pm
I want to add you on Twitter…… but having a problem of doing it.. can you help?
Posted on April 20th, 2009 at 12:33 am
I have been thinking about developing a test like this for some time, however I was going to base it on resistance and support points of the various indexes…. looking forward to seeing the outcome.
Posted on April 20th, 2009 at 7:29 am
I will update this post every day until the experiment finishes. I might run some experiments using other patterns.
Posted on April 20th, 2009 at 10:02 am
Nancy, I can see you on Twitter. You are all set.
Posted on April 20th, 2009 at 10:04 am
“I am looking for an engulfing bar using the 60 min charts.”
when you are using engulfing bar as bullish indicator
what bar are you using as bearish indicator? Here on candlesticker are many bearish indicators, which is the best?
Posted on April 20th, 2009 at 12:52 pm
The engulfing bar can be used as a bearish indicator too. See here http://www.candlesticker.com/Cs44.asp. I like the engulfing bar pattern. Dark Cloud is also fantastic. http://www.candlesticker.com/Cs48.asp
Posted on April 20th, 2009 at 6:52 pm
I find your blog great! SOOOO interested in this automation experiment of yours. Please keep me posted……and thanks!
Posted on April 21st, 2009 at 6:17 pm
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