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Showing posts sorted by relevance for query pm_ema_trader. Sort by date Show all posts
Showing posts sorted by relevance for query pm_ema_trader. Sort by date Show all posts

Saturday, January 19, 2013

PM_EMA Strategy for NinjaTrader - Setup Review

Hello everyone !
It has been a long time since the last post we made about this setup, so we are going to explain it to the maximum detail and show how to trade it with its TIS_EMA_Indicator and the Strategy PM_EMA_Trader.

This is a Trend Following Setup, so it works better with trending Markets.
It can be optimized for Impulsive Markets, but it will not perform in its best way. There are other Setups focused to Impulsive Markets ( See Impulse Setup ).

In terms of simplicity and easy to use this is one of the most easy and simple setups to follow and we only need to focus on 2 ( two ) Indicators :

  • An Exponential Moving Average ( EMA )
  • An Envelope ( Fixed number of ticks above and below the EMA )

The Exponential Moving Average (EMA) defines the trend and also is the entry ;
...when price is above the EMA, we want to go Long at its price
...when price is below the EMA, we want to go Short at its price

The logic is that the price will bounce near the moving average, several times, until the trend is over.... ( more about this later...)

Now we need to define when we are trade ready, and this is where we use the envelope.
While price is inside the envelope, we can consider the market is in sideways mode. So, no signals, no trades...

When price touches the upper band of the envelope, the setup changes to BUY Mode.
When price touches the lower band of the envelope, the setup changes to SELL Mode.

Some examples on the following charts :

This example starts with bars inside the envelope, so the setup is in neutral mode.
When bar touches upper band, the Buy Mode Start and we start looking for an entry at the moving average

Similar example for Short Signal :

On this example price start from inside the envelope ( bars are gray ) until the low of one bar touches the lower envelope and the Setup switches to Sell Mode.
At this point we start looking to short the moving average.
We get several entries ; each time price touches the lower band the bars turn red and the setup sets to Sell mode again.

What happens when the trend is over ...?

Lets look at the following example ;

We can see on the last Short of this chart, that price continued going against the trade touching the upside band triggering the Buy Mode.
If our stop is big enough to survive this move, when the price comes back to allow the long entry we can unload the short entry at a minimal loss.
This behavior is very frequent on  trending markets.

There are several ways to trade this setup, we can use a small stop, slightly lower than the envelope size, so we have a standard size loser at the end of the trend. The advantage is that those losers will be always equal and small.
Or we can use a big stop, usually twice the size of the envelope, resulting in a final average loser small but with some big losers.

Detail of the reversal procedure :

On these example charts we are using the Indicator for Ninjatrader TIS_EMA_Trader_Indicator with which we can indicate the period of the moving average and the size of the envelope and it will paint bars according to the trade setup.

With this trade setup automated, like the PM_EMA_Trader Strategy, we can 

  • Perform a Scan of all moving averages to find the bests to use and worsts to avoid

  • Optimize Targets, Stops and Envelope Sizes
  • Research Best Times and Days of Week to trade
  • AutoTrade the Setup !
If you have any question about this setup just let me know or post your opinions here !


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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

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