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Automated BuyZone

Posted: Tue Dec 04, 2007 3:06 am
by Ken_S
Based on TRO's BuyZone method, I've had the prop. firm I trade with code a custom application to automatically trade the first BuyZone entry of the day fading the gap. The application has the following variables:
Symbol to trade, # shares and/or $ to trade, gap amount, retrace amount, profit target amount, time price is above profit target/stop loss, stop loss amount, and exchange.

Once in a trade, the user can override the program to exit using discretion (for better or worse).

So far, I've been trading small shares on AAPL, RIMM, GOOG, and GS. I traded 100 shares to start, but that cost me a lot of money working out the bugs in the program. :(

The program will enter on a market order once the BuyZone as we know it is entered, and create a stop limit order for exit.
I've spent a lot of time backtesting/scanning for symbols that show historical profitability using the method. A few observations:

1. Backtesting/optimizing can show a high win% just waiting for the profit target to get hit for the day, but once in a while, you get those days where you loose 10-20 days worth of profits. Having a stop loss can sometimes improve the backtested results.

2. Avoid trading a symbol if there is significant news (earnings, up/downgrades, etc.) about that stock or market sector that will disrupt the "normal" price movement. RIMM was a good example today. Downgraded, gapped down for a long entry, entered buy zone long, but wouldn't have hit my profit target.

3. I backtest/optimize using TS and their data. My prop. firm uses esignal data which usually results in different opening prices between the two. TRO also mentioned this problem on another thread the other day. So, I'm lowering the profit target number from what is shown as optimal over the past 1-3 months.

4. I enter on a market order which sometimes results in negative slippage, but my profit target price is calculated from my actual entry price. Another reason to lower the profit target amount from what was optimal historically.

Today's results were 70 shares traded, $32.50 profit before comm. A nice profit/share ratio. I'll be scaling up sloooowly and adding more symbols accordingly.

My next step is to modify one of TRO's plotting indicators to make is faster to scan for trading candidates to spread the risk across many symbols.

This strategy is capital intensive, so trading with a prop. firm and getting 20+:1 leverage helps. Lower than retail commissions helps too.

I'll post my progress and results going forward so others may learn from my ATS project.

Good trading to all.

Posted: Tue Dec 04, 2007 5:43 am
by Patch
Ken_S

Congratulations, this sounds really good.

Go for small profits.jb

Posted: Tue Dec 04, 2007 3:38 pm
by Gert Frobe
when you are milking the cows w/ the buy zone you have to keep a lookout for the "mad cows" that will take you profits.

airball

Posted: Tue Dec 04, 2007 5:06 pm
by eudamonia
Airball,

Mad cows. Ha! That's great.

Ed

Posted: Wed Dec 05, 2007 2:23 am
by Ken_S
350 shares today for $35 within 5 seconds after the open. Canceled GS on downgrade.
Yeah....shoot the mad cows....

Posted: Wed Dec 05, 2007 6:34 pm
by Ken_S
480 shares, -$5.60
Input errors before the open cost me all my profits....plus hoping...

Posted: Wed Dec 05, 2007 7:31 pm
by BP
Thanks for posting. Good luck.

BP

Posted: Thu Dec 06, 2007 9:05 pm
by Ken_S
440 shares, -$353
Toasted and roasted on AAPL.
Yep the LOD was me going short.
Got caught with the difference in opening prices. There was a two cent difference in opening prices between TS and esignal. I got filled short by one cent over my threshold. Never should have let is go so far against me. I need to spread my risk over more symbols too.

Posted: Fri Dec 07, 2007 4:54 pm
by BP
which broker are you using for the signal? and which one to do your trading?

Thanks,

BP

Posted: Fri Dec 07, 2007 6:42 pm
by rrobin
Ken

Are you trying to scalp or trade the gap.

I like to scalp using the buy zone and fade as set up direction.

But I have the trigger finger on the close trade button at all times.

RIMM seams to be an easier trade when the fade runs away at open then

returns to try and fill. All of this can happen in the first minute. If it takes longer just wait.

Remember that the buy zone is based on stats, the cow should move 0.50.