Visual work of the trader

Most traders spend much time on the establishment and optimization of new, highly efficient trading systems. However, the real work of the results are not so impressive. Rather, in most cases blame the human factor. The author tries to visually assess the quality of successive transactions by trader using graphics of Japanese candles. The possibility of such an assessment can help the trader to adjust its strategy in the market

Mechanism sapiens
The main activity of traders practicing mechanical approach to work (when they are not in the market, of course), is to create their own trading systems. Typically, these systems include a model of market behavior on the basis of technical analysis, installation of protective orders and some money management rules, more precisely, the rules of the increase (decrease) positions, depending on evolving market trends. Ideally, when the trading system was created, tested, optimized, etc., the trader must operate automatically, performing in the market system served the team. In an automated, but not automatic. The small difference in terminology leads to significant changes in the work: the system is another link - the trader. Made them the human factor can greatly affect the efficiency of trade. This is compounded by the fact that usually when the market does not use a trading system. It is also possible to use multiple configuration of a system. And the choice is usually also a heuristic nature.

How to minimize harm and maximize the benefits emanating from the trader in the work of its systems? As always, you can try to apply a universal way - to use feedback as a result of real work. To do this, provide a simple method of visual interpretation of its results.

Samurai method
As this method of interpretation of the work can be scheduled to invite the Japanese candles. Suppose that a trader has a certain history of transactions on a real instrument. Let us try to interpret each complete transaction (buying and selling) as a standard candle of tehanaliza. The analogue values Open will be the value curve arrived at the beginning of the transaction. The analogue values Close - the real value of the curve at the end of the transaction profits. The analogue value of High will be the value of the profit curve, if the position is closed at the highest (for bovine market) point on the interval of the transaction. A analogue Low - the value of the profit curve, if the position is closed at the lowest (for bovine market) point on the interval of the transaction. In the case of short positions need to change the High and Low. The proposed data representation body candles will demonstrate a real profit from the transaction. Lower the shade - this is a possible drop in profit in the most disadvantaged in the closing of the transaction interval, the upper shadow - the amount of lost profits on the deal before the interval. By placing such a candle in a manner consistent with the actual operations, it is possible to obtain a fairly complete picture of the profitability of the curve, to assess the quality of the trader, the trading system and may further adjust the trade on the real market. After analysis of all individuals in the instruments can be easily evaluated as the applicability of the system and their own mental preferences.

How it looks
Consider as an example of testing one of my trading system on a real trade (Table 1).

Originally intended to test the work of sound, without a stop signal, without the margin, without correction of fundamental analysis. To simplify the results excluding brokerage commissions, overhead expenses and the discount for the term of the transactions. The purpose of operations, it was not making a profit as such, but development of the interaction between the trader and the actual market. It was interesting, because pure system shows the best, both qualitative and quantitative results than with the limitations imposed on it by the foot and the various filters.

Apart from dates, at first glance, everything is fine: the profit curve is going up. Interest earnings on the use of capital is also not bad. Let's see now, as the profit curve is a graphical interpretation (Fig. 1).

There are already the outcome of the case. Transactions 1-5 were quite successful, but I decided to play with time window and attempt to increase profits. The result in the absence of a stop-signal, demonstrating a significant Drawdown bar number 6. Bar shows the number 7 is nothing but sheer stupidly attempt to go against the market, despite the mounting losses, ie averaged.

Interestingly, the trading system has proved quite resistant to the most unprofessional actions of the trader and drew the final profit. Again: the transactions were carried out for debugging trading system and it was assumed that the human factor will not be. But, alas, even in small-money, in the experiment, all turned out differently.

During the experiment, I broke a lot of work in the market. Bar 3 - spasmodic closure of the position without the alarm system, 2 bars - the closure of positions in the movement are not, the bar 6 - to change the parameters of the system directly to the work of child illness averaging mentioned. Really good, you can recognize only the bars 1 and 5. A further development of the proposed method may be operative in the course of bidding, the analysis of transactions and the selection of appropriate strategies for each trader. For me the best are the candles with small upper shadows. However, this topic has already applies to the consideration of characteristics of my trading system and not connected with the proposed methodology.

Gaps: friend or enemy of the trader?

All the traders used to see on the graphs of market gaps between the price the previous day's closing price and the current opening. Call these breaks gepami. Causes analysts interpreted in different ways, primarily based on fundamental analysis. Even more vague possibility of filtering gepov, not to mention their rational use.

Literary floor in tehanalize
Gap - this is the English literary word (not an abbreviation, as many mistakenly believe), which can be translated into Russian as «gap». In economic terminology, this term is used very broadly, and refers to the difference between any of the values. Thus, gepom called the excess of assets over liabilities. The greater the percentage gap, the higher the potential risks of interest. There is even a risk-management industry, which is called the «gap-analysis».

The technical analysis of the word «gap» is quite unambiguous in nature - it is visible on the graph bars or Japanese candles, based on prices of opening and closing the gap between the current candle or bar and the previous candle, or bar. On the other graphs, such as a linear graph or graph tic-tac-toe, gepy not be able to see.

Figure 1 are gepy in the afternoon schedule of shares of RAO UES. As can be seen, they occur more frequently. On the stock market gepy - is not uncommon, though, such as round-the-clock on the FOREX market, they occur much less frequently (Fig. 2). If the action does gap up or down, it's quite a significant signal that can be used by the trader to make a decision. Some analysts believe the market shares gepy signs of accumulation or distribution.

On the stock market gepy - is not uncommon, though, such as round-the-clock on the FOREX market, they happen much rezheNa stock market, there are two options gepov: arose as a result of reported revenue growth of the issuer and the artificially induced brokers. In the first case, the value of the gap indicates the potential power of the trend, which is directed towards the gap. The immediate cause of such gepov rooted in high expectations of analysts. Naturally, working in the market of large institutional investors are beginning infusion of money in the stock issuer, show more profitability. In fact gepy suitable for fashionable now trade on the news as a confirming factor in technical analysis. The task of the trader in this case - to catch a gap in the time gap since it is an opportunity to continue the rollback.

This, of course, is the gepah up. Gepy down, respectively, are due to the reported decrease in income issuer. It should be noted that gepy down - more rare than the top. They speak of any «great shock», occurring at the issuing company.

As a consequence, we can expect the continuation of the fall of the company's shares. So investors should sell their shares as soon as he saw the gap down. It should be noted that not all gepy developed under the influence of news, the authenticity of which is proved. Often, these news stories may be mere rumor, which, in particular, now accrete «YUKOS case».

Pro and contra
There are a number of strategies which say the contrary: the gap is not continued, and izlet trend, and already the more it is a new trend. For example, if the gap was formed up, should get up in the short position and wait for the completion of the trend. This is called gepom izleta, it forms a new maximum price. Similar gepy can be found in the charts of financial instruments (Fig. 3).


But how to find this pattern? It is this strategy correct?
The issue is a discussion. The point is that the gap izleta may arise precisely because of the increased flow of investment into the company. In this case, technical analysis is powerless to fundamental factors, and clear all the failure of this strategy. It should be noted that, according to many analysts, «threshold impotence» technical analysis are, for a variety of sources, the infusion of 5% to 10% of the total capitalization of the company. But how do you solve this dilemma, with the only technical analysis? It is obvious that the direction toward the dominant trend observed at the opening day of the gap - the gap is continuing. In this case, it is advisable to open in the direction of gepa. However, it also cuts both ways - if the gap is too big (criteria value, the truth is rather vague), may be followed by rollback.

But the gap can be strong and stop the trend when the market goes self-doubt, investors that are long ranged with the decision, and, finally, seeing the force of the trend and opened positions. Such gepy typically marks the beginning of retrogression, or even a change of trend. Open positions against the trend in this case it is necessary, exposed pre-loved stop-loss just outside the peak. You can also use gepy izleta trend to fixation of existing profits.

Types gepov
Most often we deal with gepami on daytime schedules, raised at the opening of the market. At all-day market FOREX such gepy sometimes occur after the weekend. Analysts have developed a set of rules for this type of gepov. Thus, it is believed that gepy the opening of 60% of cases may be during the day partially or even completely filled. Similarly, external bychi gepy opening (outside of any level of resistance or support) up to a new maximum of 60% of cases. Up to 70% of the likelihood of achieving the new minimum in the case of Bear external gepa.

If the gap is not filled within the first 15-30 minutes after the opening of the market, this is a strong signal that the market will move in the direction gepa opening. There are several types gepov:

- Complete breakdown of top (opening price of the day above the previous peak);
- Complete the gap down (opening price of the day below the previous minimum);
- Partial break-up (opening price of the day above the closing price the previous day, but below its peak);
- Partial break-down (opening price the day following the closing price the previous day, but above its minimum).

There gepy breakthrough. They are fundamentally different in that there are important breakthrough in the levels of resistance or support. Price falls sharply from the previous trading range, which is reflected in the chart bars in a gap between the current and the previous bars. If such a gap is formed at the end of a technical analysis of the figures, it can serve as a strong sign of confirmation of this figure.

Further movement can occur naturally in the breakthrough, which can be very dynamic. Usually gepy breakthrough is accompanied by increased trading volume and volatility. The bigger the gap, the less likely it is closed and the return of the price back.

Trade at rupture
When you trade through gepov should pay particular attention to market volatility. You need to install a range of deviations of the price a financial instrument, which saw the gap. We recommend that you put a floating stop-loss, the amount of which depends on market volatility.

The strategies of trade on rupture often was far from scientific methods resembling guesses. But others are mathematically precise trading strategy, which are based on formulas in MetaStock.

The strategy to develop trading systems, looking gepy, simple: in a primitive form of general enough to calculate the gaps between the opening price of the day and the previous extremum. For example, both built below the trading system, which is part of the market towards full gepa:

Enter Long:
L> Ref (H, -1) OR Cum (1) = LastValue (Cum (1))
Enter Short:
H

The results of testing this trading system for shares of RAO UES of Russia are as follows: the average profit margin - 99 points in the month, 8 to 14 profitable transactions unprofitable.

Figure 4 shows the schedule for return of the trading system. The second trading system differs from the previous one that also takes into account the partial gepy, allowing for the possibility of using opt1 regulate the amount of gepa.

Enter Long:
N1: = opt1; L> Ref (HHV (H, N1), -1)
OR Cum (1) = LastValue (Cum (1))
Enter Short:
N1: = opt1; H
OR Cum (1) = LastValue (Cum (1))

When opt1 = 4 the system shows the result of 204 points in a month, 3 winning deals against one loss (Fig. 5).

As we have seen, described the system outputs are not. Next the system is equipped with an exit, is also on the difference in prices of opening and closing of neighboring days:

Enter Long:
N1: = opt1; L> Ref (HHV (H, N1), -1)
OR Cum (1) = LastValue (Cum (1))
Exit Long:
N2: = opt2; C
Cum (1) = LastValue (Cum (1))
Enter Short:
N1: = opt1; H
Cum (1) = LastValue (Cum (1))
Exit Short:
N2: = opt2; C> Ref (HHV (H, N2), -1)
OR Cum (1) = LastValue (Cum (1))

This system provides 6 to 5 of profitable transactions unprofitable. The result - 201 item per month (Fig. 6) - about the same as the second system.


Needless to get involved is not worth
From all the above we can conclude that to develop a strategy based on gepov - case ungrateful. No clear criteria for «truth» gepa, and it is unlikely that they will be worked out by technical analysts. Trading systems based on gepov can be used, but the MTS with other technical indicators give better results. Moreover, the developers, testing trading systems in the stock market, is a question as to filter out gepy. This universal tool has not yet been found. It is indisputable that in different markets, the frequency of occurrence gepov quite different. Thus, in the Russian market chaotic nature of speculation in illiquid stocks, of course, creates gepy, both public and intradey. On the NASDAQ gepov much less than the NYSE, while in FOREX at all unusual museum, which, if happens, it serves as food for a long reflection on the fundamental causes of the analysts of this phenomenon and its possible consequences. So what is the gap Technical Analyst - friend or foe? In obschemto any technical factor can be a benefit. Also gepy can be used, for example, as a powerful means of identifying izleta market at the close of the existing position or to accept a certain level of a breakthrough when trading on the break. But overly enamored gepovymi strategies do not