Tuesday, October 23, 2007

Your Best Trades: It's Not What You See, But How You See It

The Smallest Change in Graphics Affect the Success of a Trading Plan

We introduced version 2.1 of Trade-Ideas PRO back in May. The 'Flip' feature receives the most attention and fanfare at the conferences and summits we attend (more on the recent User's Summit hosted by Scottrade in an upcoming post).

How We See Affects Our Trading

And yet we slipped in a View Mode feature with three options that I really appreciated just yesterday thanks to a customer's comment. The new View Mode lets you further shape the information we publish to fit your preferences for making good decisions. There's no better way to judge anything we do to Trade-Ideas than that. Is there?

The latest version of the TI Pro Manual describes the feature with an economy of words - The "Group & Sort" mode is the most interesting to me:

The "View Mode" menu item is used to change current view mode of the Alert Window. Select the desirable view mode from the list and the Alert Window will be updated immediately. There are three view modes available:
  1. "Newest First" – new alerts are added to the window and window is automatically scrolled according to direction settings (for example, if direction is down, new alerts are added at the top of the window, and older alerts are moved to the bottom of the window); newest alerts are not highlighted (this is the default view)

  2. "Write Over" – new alerts are added to the window according to direction settings so that newest alerts will overwrite oldest alerts; window is not
    scrolled; newest alerts are highlighted; there is one blank row or column between newest and oldest alert

  3. "Group & Sort By" – you have to choose the sort field from the list to activate this view mode; newest alerts are also highlighted

How View Mode Helps Your Trading

Forget about looking at the alerts in chronological order for a moment.

Example 1: Symbols. Order the alerts by symbol as in the TI Pro Manual's example and see all the alerts for a particular stock in one area clustered together to better read what the stock is doing over the course of the day. I sometimes like to see multiple bullish alerts on a stock before trading it. This can be difficult if the alerts for the stock are separated by others chronologically over a few seconds. Grouping them by symbol let's me see the symbols as hives - where are the bees (the alerts) the busiest? I see where the activity is because the newest alerts arrive within the window in high white-on-black contrast.

Example 2: Volume. Sort the alerts by their relative volume and see only the most important volume moves in the alert window. Sometimes my minimum threshold for relative volume is too low - I prefer not to be distracted by the alerts on the smaller end of my volume threshold. Sorting by relative volume keeps the smaller moves at the bottom of the window and only the most important moves appear at the top.

You can see other applications of the View Mode as you experiment with the options.

I'll end this with the full quote from which I get the title of this post - Professor Edward Tufte whose work on getting the most information (density) out of images (called information throughput) greatly influences are work at Trade-Ideas:

"At their best, graphics are instruments for reasoning about quantitative information. Often the most effective way to describe, explore, and summarize a set of numbers - even a very large set - is to look at pictures of those numbers. Furthermore, of all methods for analyzing and communicating statistical information, well-designed data graphics are usually the simplest and at the same time the most powerful."

The Visual Display of Quantitative Information, Edward R. Tufte, 1983

Saturday, October 20, 2007

Weekend Reading: Trading Routines of a Skilled Market Veteran

A great read this weekend is the Charles Kirk interview in the recent issue of Technical Analysis of Stocks & Commodities. Kirk is an excellent resource to tap as someone who describes what he's doing in the market and how he trades opportunities without selling it like a stock picking newsletter.

He is most famous for his exhaustive and always interesting collection of links and articles.

The full text of the interview appears here. Take a good look over Charles' left shoulder and you'll see what appears to be a Trade-Ideas scan!


Monday, October 15, 2007

OptionsXpress Robot Upgrade!

Save Layouts

We have made some improvements to the OptionsXpress Robot software. The new version 0.9.2 cleans up bugs found from users' feedback.

Additionally this version offers the option of saving your robot windows as a layout. For those that already have the software you will be prompted to upgrade, for those that have not downloaded the software you can do so from http://www.trade-ideas.com/optionsXpress/Robot.html


There have been questions on how the Robot works the Fixed Shares versus Fixed Price fields in the Robot Config window.

Here is the short answer: When you have Fixed Shares selected in the Config window you have to have $ selected in the Move Type in your Trade Instructions window. Otherwise the system will ignore signals. If on the other hand you have Fixed Price selected in your Config window then you have to have % selected in Move Type on your Trade Instructions window. This is for your protection and allows the Robot to trade the way you do.

We have been getting a lot of good feedback from our automated trading pilot participants and the software will continue to improve. If you have any questions about the software or the pilot program please do not hesitate to send your questions to info@trade-ideas.com

Wednesday, October 10, 2007

Using Trade-Ideas with E*Trade? A Special Invitation

We'd like to know if you are currently a Trade-Ideas subscriber trading with E*Trade. If so we'd like to invite you to share your thoughts privately about your experience.

As a thank you for your accepting our invitation and sharing your insight, we'll credit your account with 100 uses of The OddsMaker event-based backtesting tool. There may even be bigger benefits to you for participating, but I'm not going into any further details here.

Please respond to david@trade-ideas.com if you can accept this invitation. Thanks!

Monday, October 08, 2007

OptionsXpress Pilot Underway!

The OptionsXpress Automated Trading Pilot program is now officially underway. It is very easy to get started. You just need an account with OptionsXpress and a subscription to Trade-Ideas.
Click (Here) to download the latest version of the OptionsXpress Robot.

Please make sure that your OptionsXpress account is permissioned for XML API trading, otherwise you will not be able to log in to the robot software.

Our OptionsXpress Robot software will automatically enter and exit stock trades for you, in your OptionsXpress brokerage account, based on your Trade-Ideas alerts and filters settings. The software can ENTER, EXIT, and STOP you out of positions, as well as TAKE PROFITS. In addition to being fully automated you can have the Robot enter trades for you exit those trades manually.

Below is the video help that will give you an overview of how the Robot software works.

You should already be familiar with using the OddsMaker to test your strategies. If you do not know how to use the OddsMaker please contact info@trade-ideas.com to set up an appointment.

Thursday, October 04, 2007

How My Trading Improved Thinking Like a Martial Arts Fighter

Bang! Bang! Oof! Ouch!

These aren't the sounds from a day in the market, it's the sounds of Mixed Martial Arts (MMA) which is quickly becoming one of the fastest growing sports in the world. I'm a big fan of not only the incredible action in the ring, but the mental chess that's played in the fighters' heads. When opponents face one another in the ring, they juggle 3 complete games to be competitive. A fighter must know how to:
  • Strike (i.e., punching-boxing and kicking)
  • Develop a great ground game (i.e., wrestling and submissions)
  • Maintain excellent conditioning outside the ring
Persons that compete at the top in the Ultimate Fighting Championship (UFC) are no one trick ponies. Leave a comment about your preferences for this type of sport compared to boxing below.

Connecting with the Punches

Trading requires a similar multifaceted arsenal to succeed.

Trade in Bull Markets? Trade in Bear markets? Trade when there's no wind in either sail? You will simply not be in the game long without a plan for when to trade (i.e., Strike), proper Risk Management (i.e., the ground game), and continuous education and training (i.e., conditioning). Just like a dedicated mixed martial artist trains hard to prepare for a fight, you have to train yourself to win in the market. Learn the discipline, use the right tools and you can improve - there is no magic, only continuous learning and adapting.

"Watch these green lights or watch these red lights"

So often I see traders either unwilling or unable to learn the 3 needed skills to be successful. If I am up late at night from time to time I catch the infomercial where some vendor is promising the next magic system. "Watch these green lights or watch these red lights", "it is so easy I made money in my sleep".

These companies continue to make a ton of money preying on people's desire to have someone figure it out for them. The reason these systems don't work is because the market is not easy. If people keep telling you that it is easy they are for certain trying to sell you something. Ask yourself why money managers are making billions. I can guarantee you with 100% certainty that the reason is because making money in the market is NOT EASY. Would you step into the ring with an MMA fighter right before your weekend afternoon nap or after the ballgame? Unlikely.

MMA is just a physical metaphor of the discipline a trader needs in order to see results and correctly diagnose actions that need correction. Commit to improvements in these areas, catch a little MMA in action, and you'll be the one dancing in the ring when the bell sounds off.

Monday, October 01, 2007

Automation, OddsMaker, and Expectations: Lessons Learned so Far

We are not only software makers, we are our own Guinea pigs (kinda like those hairclub companies).

Fully automated trading recently arrived to the suite of Trade-Ideas tools. We do this by first implementing a strategy created and backtested via The OddsMaker. Then we execute the strategy rolling forward via an API (Application Programming Interface) connected directly to the broker dealer. Our software, called "The Robot" sends market orders to buy, takes profits when needed, and manages risk with stop-loss orders.

Observations: Critical to be in the Top Right Quadrant

What does that mean? Stop and read our post that explains the meaning of this image.
  1. It is critical to create a strategy that has both a high win-to-loss ratio as well as a big difference in winning trades versus losing trades.
  2. Make sure that the strategy is one that you can actually follow. In fully automated mode we have the benefit of computer based executions, but with traders who use only The OddsMaker without the automated trading, it is difficult to follow a strategy that calls for an entry into 10 stocks in the same minute. Please consider all of these things when designing systems.
  3. Risk management ensures survival. Odds attempt to describe a probable outcome with certainty - but never in absolute terms. Each morning compare your previous day's results with The OddsMaker results we've just added overnight, see if there is big difference and if so, try to find out why. Remember that we are here to help. If you are using a strategy and your results are not what you are expecting, STOP. Talk to us and let us help you figure out where there is a problem. One on one training is available.