Tuesday, June 02, 2009

VWAP Mashup of the Daily Trading Coach and Trade-Ideas

A Strategy-Session post.

The Daily Trading Coach

Dr. Brett Steenbarger is a trader's coach.  As essential as his experience getting the best performance out of traders is the way in which he conveys his wisdom in plain language - judge for yourself in his latest (his third) book on improving trader performance and decision making, The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist.

His lessons, culled from direct interaction with professional traders, continuously produces a fountain of important methods for controlling emotions, dealing with mental obstacles, as well as (like today) generating great trading ideas.

The Mashup

So here's a mashup of an article about trading ranges and VWAP appearing on his blog today with its corresponding Trade-Ideas strategy window.
Dr. Steenbarger's article: 

Trade-Ideas Strategy:

Below is a summary of the alerts and filters used.  Click on any of them to understand what the specific settings and definitions are.  
 Positive VWAP Divergence; Filter=3 (Minimum % up) Min Price=10 (Dollars) Max Spread=15 (Pennies) Max Distance from Inside Market=0.1 (%) Min Daily Volume=750,000 (Shares / Day) Min Current Volume=2 (Ratio) Min Options Volume=1,000 (Contracts) Min Position in Range=25 (%) Max Position in Range=95 (%) Min Consolidation=1 (Days)

This strategy is a short strategy: all opportunities are found when price decreases.  The trade plan that produced excellent results was a hold time of 15 minutes or a stop loss of $0.25 + each stock's specific volatility measure (what we call the wiggle - Google results here) - whichever comes first. Additionally the entire trading day is used to capture this pattern (i.e., no specific time of the day was specified to make trades). 

Here is the backtest result for the last 15 days for this pattern generated by The OddsMaker within Trade-Ideas PRO:









The summary reads as follows:  

This strategy generated 52 trades of which 28 were profitable for a win rate of 53.85%.  The average winning trade generated $0.41 in profit and the average loser lost $0.09.  The net winnings of using this strategy for 15 trading days generated $10.42 points.  If you normally trade in 100 share lots, this strategy would have generated $1042.  The z-score or confidence factor that the next set of results will fall within this strategy’s average winner and loser is 100%.

Understand these backtest results from The OddsMaker in more detail by reading the User’s Manual:  http://www.trade-ideas.com/OddsMaker/Help.html

Related Articles

Previous OddsMaker articles here

Previous Strategy-Session articles here

1 comment:

Anonymous said...

Its been a week with no updates c'mon guys get some content up or I'm switching to street smart pro.

Clint