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Monday, March 4, 2013

PM_EMA_Bouncer Strategy for Ninjatrader

New Setup : PM_EMA_Bouncer Strategy for Ninjatrader

Hello everyone, we have a new setup to share with you.
It is very easy to follow and can be considered as an "alternate version" of the PM_EMA.

The PM_EMA is a trending setup. On this blog you will find several posts about it.
We follow an EMA ( Exponential Moving Average ) and when price is far enough from it we are in Trade Ready condition. To measure the distance between price and EMA we use an envelope. The entry is a bounce at the EMA :

The indicator painting the bars on these pictures is the TIS_EMA_Trader_Indicator, so it paints bars according to the trend, while PM_EMA_Bouncers trade against it. So; 
  • Blue Bars = Sell Stop at EMA+Offset
  • Red Bars = Buy Stop at EMA-Offset
The PM_EMA_Bouncer Setup uses the exact same logic to trigger the trade ready condition but early and in opposite direction, so by definition it is a Counter Trend System

We can use an early entry that allows to take a profit at the EMA. A value near the half of the envelope looks like working very well. And the envelope needs to be a higher than on PM_EMA setups. On CL a value of 30 is fine, allowing a minimum target of 15 ticks.
The example ( Range 6 CL Chart ) is using a 20 ticks target with an early entry of 10 ticks. The envelope is 30 ticks

This way, when we have a PM_EMA Long signal, we can take a PM_EMA_Bouncer Short and take profits near the Long Entry.
On some other more volatile Markets like Crude Oil or Gold, where EMAs can not offer good support we can use a bigger target all the way through the EMA.

With the PM_EMA strategy using the correct offset entry, is possible to calculate the PM_EMA_Bouncer performance by switching profit with loss.
Unfortunately, it is not possible to optimize the settings, because it will find the best profitable values, and we are looking for the worst values on PM_EMA.
Executing an Optimization of PM_EMA testing a wide range of moving averages periods, we can export the results to excel and create a chart of PnL vs Period.
This way we can choose the worst Period and use it on the PM_EMA_Bouncer Setup.
On this video you will find a brief description of how to do such thing :

As I found this setup very useful and sometimes it is a good replacement for PM_EMA when we find a good losing setup on PM_EMA it is a good winner on PM_EMA_Bouncer, I decided to create a dedicated strategy to backtest, optimize and trade this setup.

The strategy PM_EMA_Bouncer can be found on The Indicator Store Market and is the perfect companion for the PM_EMA_Trader

logo Pablo Maglio The Indicator Store 
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